Option Trade 
Synchrony Financial (NYSE:SYF) Calls 
Friday, January 22, 2016

**OPTION TRADE: Buy the SYF Mar 2016 30.000 call (SYF160318C00030000) at approximately $0.50 (or market price if preferred). Place a pre-determined sell at $1.00 (or double entry price).

Note: No protective stop losses added.

by Ian Harvey

January 22, 2016

Synchrony Financial (NYSE: SYF), a consumer financial services company, today announced fourth quarter 2015 net earnings of $547 million, or $0.65 per diluted share. Net earnings for the full year 2015 totaled $3.2 billion, or $2.65 per diluted share. In the same period of the previous year, the company posted EPS of $0.64 and $2.98 billion in revenue.

During this quarter, total platform revenue increased 5%, compared to the fourth quarter of the previous year. At the same time, loan receivables grew by 11%, or $7 billion, to $68 million. There was strong deposit growth as well, with an increase of 24%, or $6 billion, to a total of $43 billion.

Despite a market cap of more than $23 billion, which is larger than rival Discover Financial's (DFS), many investors have never even heard of Synchrony.

And that's unsurprising, given that the 83-year-old company is brand new in many ways.

Synchrony's apparent obscurity can be explained through its long history as a subsidiary of General Electric (GE), which has been making no shortage of departures lately, from its corporate headquarters in Fairfield, Conn., to the majority of its financial operations as CEO Jeff Immelt seeks to return GE into a purer industrial play.

After spinning off Synchrony as a public company in 2014, GE released its remaining 85% stake in Synchrony, valued at more than $20 billion, in November. That cleared the way for Synchrony CEO Margaret Keane to obtain Federal Reserve clearance to become a standalone savings and loan company.

The estimated Common Equity Tier 1 ratio under Basel III subject to transition provisions was 16.8%, and the estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 15.9%. Return on assets was 2.6% and return on equity was 17.5%.

Margaret Keane, president and CEO of Synchrony Financial, commented on earnings:

The fourth quarter marked a successful conclusion to a historic year for Synchrony Financial. We maintained strong momentum across each of our business platforms and our receivables, deposits, and revenue growth remained solid. We continue to leverage our array of value-added capabilities and vast experience to propel growth, expand our distribution, and attract new business. This past year alone we renewed five key relationships and signed a number of new partners, while expanding our network through new strategic alliances. And we were able to achieve this while executing on our separation from GE. We aim to continue to build on this momentum in 2016 and are excited about our future growth prospects and opportunities as a stand-alone company.

On the books, the company has cash and cash equivalents totaling $12.33 billion, compared to $11.83 billion in the same period from the previous year.

Synchrony has also been greatly outperforming its competitors, whose market share has been contracting. Since its August 2014 initial public offering, Synchrony shares have climbed 17% by mid-day trading Wednesday, while Discover, American Express (AXP), and Capital One (COF) fell 21%, 29%, and 26%, respectively.

But it appears analysts have yet to catch on to Synchrony's ability to outperform, as the Stamford, Conn.-based company beat expectations in each of its last five earnings calls.

However, analysts have a bullish outlook: of Synchrony's 25 listed analysts, 92% maintain Buy ratings (the remainder Holds) and an average price target of $38.97.

Harvey’s Options Volatility Indicator


Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the SYF Mar 2016 30.000 call (SYF160318C00030000) at approximately $0.50 (or market price if preferred). Place a pre-determined sell at $1.00 (or double entry price).

Note: No protective stop losses added.

”Success is simple. Do what's right, the right way, at the right time.”

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Options traders win because they are successful.

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