Bread Financial Holdings, Inc. BFH shares have surged 72.2% in the year-to-date period compared with the industry's growth of 8.9%. The Finance sector and the Zacks S&P 500 index have returned 13.8% and 15.7% in the said time frame, respectively. With a market capitalization of $2.82 billion, the average volume of shares traded in the last three months was 0.8 million.

BFH Outperforms Industry, Sector, S&P 500

Image Source: Zacks Investment Research

The rally was largely driven by higher retained earnings, active risk management, solid consumer spending and capital deployment.
Bread Financial has a VGM Score of A. The VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.

This Financial Transaction Services stock carries a Zacks Rank #3 (Hold) at present. The company’s earnings beat estimates in three of the trailing four quarters and missed once, delivering an average surprise of 84.37%.

Optimistic Analyst Sentiment on BFH

Two of the six analysts covering the stock have raised estimates for 2024, and two of the seven analysts have raised the same for 2025 over the past 30 days. Thus, the Zacks Consensus Estimate for 2024 and 2025 moved 7.5% and 3.9% north, respectively, in the last 30 days.

The long-term earnings growth is expected to be 39.2%, better than the industry average of 17.7%.

Will BFH’s Rally Stay?

The credit sales performance is expected to improve on the back of solid consumer spending. With the continued growth of credit sales, average loans are likely to increase. With new partner additions and holiday spending, BFH continues to expect strong credit sales.

Credit metrics should remain strong with delinquency and net loss rates remaining below the historical averages. Given disciplined, proactive risk management and strong consumer payment behavior, net loss rates are expected to remain low.

BFH is prudently investing in strategic growth areas and ramping up marketing spending in growth verticals and digital innovation and technology enhancements. Bread Financial stated that ramping up its digital and technology capabilities remains a top priority this year. It has strategic relationships leveraging BFH’s versatile mono platform, including RBC, Fiserv and Sezzle.

The company has been strengthening its balance sheet and lowering debt. Notably, its free cash flow conversion has been impressive over the last several quarters, reflecting its solid earnings. Leverage improved to less than 115% at the end of second-quarter 2024 from 400% three years back. Bread Financial also intends to pay $100 million remaining in its 2026 bonds by this year to further improve leverage.

BFH remains focused on returning value to its shareholders. It uses share repurchases as a tool to mitigate the adverse impact of foreign exchange and intends to focus more on share buybacks and mergers and acquisitions.