Bread Financial Holdings’ BFH operating income of $1.84 per share for the third quarter of 2024 missed the Zacks Consensus Estimate of $1.88. The bottom line plunged 88% year over year. Shares lost 1.9% in the last trading session to reflect the underperformance. 

The quarterly results reflected a drop in credit sales but average loans slightly improved on growth in co-brand programs. The company noted that consumer spending continues to moderate, given normalizing inflation. Loan growth was impacted by proactive credit tightening initiatives, given stricter credit risk management.

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Bread Financial Holdings, Inc. Price, Consensus and EPS Surprise

Bread Financial Holdings, Inc. price-consensus-eps-surprise-chart | Bread Financial Holdings, Inc. Quote

Behind the Headlines

Revenues decreased 4.7% year over year to $983 million, attributable to lower late fees and reduced merchant discount fees. The top line, however, beat the consensus estimate by 0.8%.

Credit sales of $6.5 billion decreased 3%, reflecting moderated consumer spending and ongoing strategic credit tightening, partially offset by new partner growth.

Average loans of $17.8 billion increased 1%, benefiting from new partner growth and stabilizing consumer spending. Our estimate for the same was $17.9 billion.

Total interest income decreased 2% to $1.3 billion, in line with our estimate and the Zacks Consensus Estimate.

Net interest margin contracted 180 basis points to 18.8%. The Zacks Consensus Estimate for the metric was 18.9%.

Total non-interest expenses increased 14% to $574 million, primarily attributable to an increase in employee compensation and benefits, and other expenses. 

The delinquency rate of 6.4% deteriorated 10 basis points year over year. The net loss rate of 7.8% deteriorated 90 basis points.

Pre-tax pre-provision earnings decreased 22.7% year over year to $409 million. 

Financial Update

As of Sept. 30, 2024, cash and cash equivalents were $3.5 billion, up 33.3% from the 2023 level.

At third-quarter 2024 end, long-term debt and other debt declined 25.3% from the 2023-end level to $1 billion.

Tangible book value was $47.48 per share, as of Sept. 30, 2024, up 12% year over year.

Return on average equity was 0.4%, which contracted 2440 basis points year over year. 

Cash from operations for the first nine months of 2024 increased 0.7% year over year to $1.4 billion. 

Capital Deployment

The board also approved a quarterly dividend of 21 cents to be paid out on Dec. 13 to stockholders of record as of Nov. 8. The company bought back shares worth $11 million.

2024 Guidance

Management estimates average receivables to decline in the low single-digit range from the 2023 level. It expects 2024 average credit card and other loans to be down in low single digits from the 2023 level.

Total revenues are estimated to decline in low-to-mid single digits. 

Total non-interest expenses are estimated to decline in low mid-single digits.

The net loss rate is guided in the low 8% range.

Zacks Rank

Bread Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Release

The Western Union Company WU reported third-quarter 2024 adjusted earnings per share (EPS) of 46 cents, which surpassed the Zacks Consensus Estimate by 4.6%. The bottom line advanced 7% year over year. However, total revenues declined 6% on a reported basis to $1.04 billion due to a fall in contributions from Iraq, partly offset by a well-performing Branded Digital business. Additionally, the top line beat the Zacks Consensus Estimate by 0.4%.

Adjusted operating margin was 19.1%, which deteriorated 50 basis points year over year. Operating income fell 22% year over year to $164.9 million, which fell short of our estimate of $201.7 million.

Management continues to expect adjusted revenues to be between $4.150 billion and $4.225 billion. Adjusted EPS is still anticipated to be in the range of $1.70-$1.80, the mid-point of which indicates a 0.6% improvement from the 2023 level. GAAP EPS is currently forecasted within the band of $1.94-$2.04, higher than the earlier guided range of $1.62-$1.72. Adjusted operating margin is still expected to be between 19% and 21%. The metric was 19.6% in 2023.

Upcoming Releases

Mastercard Incorporated MA will report third-quarter 2024 results on Oct. 31. The Zacks Consensus Estimate for third-quarter earnings is pegged at $3.73 per share, indicating an increase of 10% from the year-ago quarter’s reported figure.

MA’s earnings beat estimates in each of the trailing four quarters.

Global Payments GPN will report third-quarter 2024 results on Oct. 31. The Zacks Consensus Estimate for third-quarter earnings is pegged at $3.11 per share, indicating an increase of 13.1% from the year-ago quarter’s reported figure.

GPN’s earnings beat estimates in each of the trailing four quarters.

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