Bread Financial (BFH) Third Quarter Earnings Online, Credit Sales Rise – October 27, 2022


Pain Financial Holdings‘ (BFH Free Report) operating profit of $2.69 per share for the third quarter of 2022 was in line with Zacks’ consensus estimate, but missed our estimate of $3.11. Net income fell 39.8% year-on-year.

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

Behind the headlines

Revenue increased 15% year-over-year to $979 million, driven by higher average loan balances and improved loan yields. The top line missed the consensus estimate by 0.6%, but exceeded our estimate by $937 million.

Credit sales increased 4% to $7.7 billion, driven by existing partners, as well as the addition of new products and partner brands. Average receivables of $17.6 billion increased 14% year over year.

Total interest income increased 22.5% to $1.2 billion and exceeded our estimate of $1.1 billion. Net interest margin increased by 100 basis points to 19.9%.

Total non-interest expense increased 13% to $486 million, primarily due to higher compensation and benefits expense and information processing and Communication. Our estimate was $477.1 million.

The delinquency rate of 5.7% deteriorated 290 basis points year over year, while the net loss rate of 5% deteriorated 100 basis points from the period of the previous year.

Earnings before tax and before provisions increased 17% year-over-year to $420 million, reflecting profitable growth and the continued success of the company’s transformation efforts. Our estimate was $460.1 million.

Financial update

As of September 30, 2022, cash and cash equivalents were $3.6 billion, up 17.6% from the 2021 level.

At the end of the quarter, the debt level had decreased by 3.5% compared to the end of 2021 to approximately $2 billion.

Tangible book value of $34.30 per share as of September 30, 2022 improved 10% from the end of 2021.

Cash from operations increased 11.8% year-over-year to $1.4 billion in the first nine months of 2022. Bread Financial’s capital expenditures were down 10.2 % year over year to reach $53 million in the same period.

Dividend Update

The board of directors approved a quarterly dividend of 21 cents to be paid on December 16 to shareholders of record on November 14.


Management expects average trade receivables growth to be in the lower double-digit range from the 2021 level.

Total revenue growth should be closely aligned with average loan growth.

Total non-interest expense should reflect positive operating leverage.

Total spend will increase sequentially in the fourth quarter of 2022, given continued investment in technology modernization, digital advancement, marketing and product innovation, as well as strong portfolio growth.

The net loss rate is guided to the upper end of the low to mid 5% range.

Zacks Rank

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

Performance of other industry players

Mastercard Incorporated (MY Free Report) reported adjusted earnings of $2.68 per share in the third quarter of 2022, which beat Zacks’ consensus estimate by 4.3%. Net income increased 13% year-on-year. Revenue of $5.8 billion was up 15% year over year and beat the consensus mark of 1.8%.

Gross dollar volume (representing the total dollar amount of purchases made and cash disbursements earned with MasterCard-branded cards) improved 11% year-over-year in local currency to 2,100 billions of dollars. Cross-border volumes (a key metric that tracks spending on cards beyond the issuing country) soared 44% year-over-year based on local currency. Switched transactions, which indicate the number of times a company’s products are used to facilitate transactions, totaled 32.4 billion. The metric is up 9% year over year.

Visa Inc..’s (V Free Report) fiscal 2022 fourth-quarter earnings of $1.93 per share beat Zacks’ consensus estimate of $1.86 and our estimate of $1.83. Net income was up 19% year over year. Net revenue improved 19% year over year to $7,787 million in the September quarter. The top line beat Zacks’ consensus estimate of $7,544 million and our estimate of $7,547.9 million.

On a constant dollar basis, Visa’s payment volume increased 10% year over year. Transactions processed (involving transactions processed by Visa) grew 12% year-over-year to 50.9 billion, despite inflation and rising interest rates, beating our estimate of 49, 5 billion.

Visa’s total cross-border volume, in constant dollars, increased 36% year-over-year in the quarter under review. Excluding transactions in Europe, V’s cross-border volume (which typically boosts the company’s international transaction revenue) was up 49% year-over-year on a constant dollar basis.

Upcoming release

Global Payments (GPN Free Report) is expected to release third quarter 2022 results on October 31. Zacks consensus estimate for the third quarter is pegged at $2.49, indicating a 14.2% increase from the figure reported a year ago.

Global Payments has delivered an earnings surprise in each of the past four quarters.


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