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What's in the Cards for Navient (NAVI) This Earnings Season?
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Navient Corporation (NAVI - Free Report) is scheduled to report fourth-quarter and 2021 results on Jan 25, after market close. The company’s earnings and revenues are expected to display year-over-year declines.
This Wilmington, DE-based lender’s third-quarter 2021 earnings surpassed the Zacks Consensus Estimate, primarily backed by strong loan originations and business processing operations. However, a fall in net interest income (NII) and non-interest income, as well as higher expenses, have been concerning. Also, a rise in provisions was a headwind.
The company has an impressive surprise history. Navient outpaced earnings estimates in all of the trailing four quarters, the average earnings surprise being 36.4%.
The Zacks Consensus Estimate for quarterly earnings is pegged at 85 cents, indicating a year-over-year decline of 3.4%. Also, the Zacks Consensus Estimate of $287.7 million for revenues suggests a 16.1% fall from the prior-year quarter.
Key Factors to Note
Loans: Per the Fed’s latest data, the consumer lending scenario was decent in the quarter, driven by a rise in consumer confidence and robust economic growth. As the economy recovers and schools return to on-campus working from remote, the company is expected to have seen student loan growth acceleration.
This, along with improving direct lending originations, is likely to have driven Navient’s overall loan balances.
NII: Decent loan demand, solid economic growth and low cost of funds in the quarter are expected to have extended some support to Navient’s NII and net interest margin. However, the prevailing low interest-rate environment and pay downs of the non-refinance loan portfolio remained headwinds.
The consensus estimate for NII for the fourth quarter is pegged at $288 million, calling for a year-over-year decline of 16%.
Non-Interest Income: Weakness in fee income is expected to have kept Navient’s top line under pressure in the to-be-reported quarter. Servicing revenues indicates a 40.7% decline from the previous year to $30.3 million. The consensus estimate for asset recovery and business processing revenues reflects a sequential fall of 10.7% to $109 million. Management expects the pandemic-related contract expirations to continue to abate and reduce revenues in the Business Processing segment by 20% sequentially.
The Zacks Consensus Estimate of $145 million for total fee income indicated a year-over-year decline of 13.7%.
Expenses: Navient’s initiatives to become a technologically-advanced company and its aim to expand services outside the education industry are expected to have led to elevated expenses, thereby, affecting bottom-line growth.
Key Developments During the Quarter
In October, Navient received all required approvals for its proposal to transfer the loan servicing for the ED-owned student loan accounts through a contract novation to Maximus, a government loan servicing company. Maximus replaced Navient as a contractor to the ED, effective Oct 20, 2021.
2021 Outlook
Management expects more than $5.5 billion in combined refinancing and in-school originations for 2021.
The company expects earnings (on a core earnings basis) of $4.5 per share for 2021, marking an increase of more than 40% from the previously mentioned figure. The outlook excludes regulatory and restructuring costs, reflects a current interest-rate environment, and includes the announced debt repurchases and utilizing the remaining share repurchase authority of $150 million.
The consensus mark for 2021 earnings is pinned at $4.49, slightly below management’s guidance. This suggests a year-over-year rise of 38.6%. Revenues are projected to decline 10.6% to $1.17 billion.
Here is what our quantitative model predicts:
Our quantitative model does not predict an earnings beat for Navient this time around. The combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better increases the odds of an earnings beat, which is not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP for Navient is +3.23%.
Zacks Rank: The company currently carries a Zacks Rank of 4 (Sell).
Stocks That Warrant a Look
A few finance stocks, which you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Franklin Resources (BEN - Free Report) , Ameriprise Financial (AMP - Free Report) and Prosperity Bancshares (PB - Free Report) .
The Earnings ESP for Franklinis +0.11% and it carries a Zacks Rank of 3 at present. BEN is scheduled to report quarterly numbers on Feb 1.
Image: Bigstock
What's in the Cards for Navient (NAVI) This Earnings Season?
Navient Corporation (NAVI - Free Report) is scheduled to report fourth-quarter and 2021 results on Jan 25, after market close. The company’s earnings and revenues are expected to display year-over-year declines.
This Wilmington, DE-based lender’s third-quarter 2021 earnings surpassed the Zacks Consensus Estimate, primarily backed by strong loan originations and business processing operations. However, a fall in net interest income (NII) and non-interest income, as well as higher expenses, have been concerning. Also, a rise in provisions was a headwind.
The company has an impressive surprise history. Navient outpaced earnings estimates in all of the trailing four quarters, the average earnings surprise being 36.4%.
Navient Corporation Price and EPS Surprise
Navient Corporation price-eps-surprise | Navient Corporation Quote
The Zacks Consensus Estimate for quarterly earnings is pegged at 85 cents, indicating a year-over-year decline of 3.4%. Also, the Zacks Consensus Estimate of $287.7 million for revenues suggests a 16.1% fall from the prior-year quarter.
Key Factors to Note
Loans: Per the Fed’s latest data, the consumer lending scenario was decent in the quarter, driven by a rise in consumer confidence and robust economic growth. As the economy recovers and schools return to on-campus working from remote, the company is expected to have seen student loan growth acceleration.
This, along with improving direct lending originations, is likely to have driven Navient’s overall loan balances.
NII: Decent loan demand, solid economic growth and low cost of funds in the quarter are expected to have extended some support to Navient’s NII and net interest margin. However, the prevailing low interest-rate environment and pay downs of the non-refinance loan portfolio remained headwinds.
The consensus estimate for NII for the fourth quarter is pegged at $288 million, calling for a year-over-year decline of 16%.
Non-Interest Income: Weakness in fee income is expected to have kept Navient’s top line under pressure in the to-be-reported quarter. Servicing revenues indicates a 40.7% decline from the previous year to $30.3 million. The consensus estimate for asset recovery and business processing revenues reflects a sequential fall of 10.7% to $109 million. Management expects the pandemic-related contract expirations to continue to abate and reduce revenues in the Business Processing segment by 20% sequentially.
The Zacks Consensus Estimate of $145 million for total fee income indicated a year-over-year decline of 13.7%.
Expenses: Navient’s initiatives to become a technologically-advanced company and its aim to expand services outside the education industry are expected to have led to elevated expenses, thereby, affecting bottom-line growth.
Key Developments During the Quarter
In October, Navient received all required approvals for its proposal to transfer the loan servicing for the ED-owned student loan accounts through a contract novation to Maximus, a government loan servicing company. Maximus replaced Navient as a contractor to the ED, effective Oct 20, 2021.
2021 Outlook
Management expects more than $5.5 billion in combined refinancing and in-school originations for 2021.
The company expects earnings (on a core earnings basis) of $4.5 per share for 2021, marking an increase of more than 40% from the previously mentioned figure. The outlook excludes regulatory and restructuring costs, reflects a current interest-rate environment, and includes the announced debt repurchases and utilizing the remaining share repurchase authority of $150 million.
The consensus mark for 2021 earnings is pinned at $4.49, slightly below management’s guidance. This suggests a year-over-year rise of 38.6%. Revenues are projected to decline 10.6% to $1.17 billion.
Here is what our quantitative model predicts:
Our quantitative model does not predict an earnings beat for Navient this time around. The combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better increases the odds of an earnings beat, which is not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP for Navient is +3.23%.
Zacks Rank: The company currently carries a Zacks Rank of 4 (Sell).
Stocks That Warrant a Look
A few finance stocks, which you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Franklin Resources (BEN - Free Report) , Ameriprise Financial (AMP - Free Report) and Prosperity Bancshares (PB - Free Report) .
The Earnings ESP for Franklinis +0.11% and it carries a Zacks Rank of 3 at present. BEN is scheduled to report quarterly numbers on Feb 1.
Ameriprise Financial is slated to report quarterly results on Jan 26. AMP currently has an Earnings ESP of +0.69% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Prosperity Bancshares is slated to report quarterly earnings on Jan 26. PB, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +0.55%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.