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Sallie Mae (SLM) Down 5.3% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Sallie Mae (SLM - Free Report) . Shares have lost about 5.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Sallie Mae due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Sallie Mae Incurs Q4 Loss as Provisions Jump
Sallie Mae, formally known as SLM Corporation, incurred a core loss per share of 33 cents in the fourth quarter of 2022. The Zacks Consensus Estimate was pegged at earnings of 46 cents. The bottom line also compared unfavorably with the prior-year quarter’s earnings of $1.05. Core earnings per share exclude mark-to-fair value unrealized gains and losses on derivative contracts.
Results were hurt by substantially higher provisions for credit losses, non-interest loss and a rise in non-interest expenses. On the other hand, an increase in net interest income (NII) on higher interest rates and robust loan originations offered some support.
The company’s GAAP net loss attributable to common stock was $80.5 million against net income attributable to common stock of $305.1 million in the previous-year quarter.
In 2022, core income was $1.76 per share, which declined 52% year over year and lagged the consensus estimate of $2.50 by a considerable margin. GAAP net income attributable to common stock was $460 million, down 60.2% from 2021.
NII Improves, Expenses Climb
NII in the fourth quarter was $381.4 million, up 3.8% year over year. Also, the reported figure surpassed the Zacks Consensus Estimate of $358.1 million.
In 2022, NII grew 6.7% to $1.49 billion. The figure also surpassed the consensus estimate of $1.46 billion.
Net interest margin (NIM) expanded 24 basis points to 5.37%.
The company’s non-interest loss was $40.6 million against a non-interest income of $152.8 million in the prior-year quarter. The loss was mainly attributable to net losses on securities and a substantial decline in net gain on the sale of loans.
Sallie Mae's non-interest expenses increased 11.6% to $140.1 million. The increase mainly resulted from higher compensation and benefits and FDIC assessment fees.
Credit Quality Deteriorates
The company recorded a provision for credit losses of $297.3 million against a provision benefit of $15.3 million in the prior-year quarter. Net charge-offs were $117.3 million, up 91.7% from the prior-year quarter.
Balance Sheet Position Robust
As of Dec 31, 2022, deposits of Sallie Mae were $21.45 billion, up modestly on a sequential basis.
Private education loan held for investment was $19.02 billion, up marginally on a sequential basis. In the quarter, the company witnessed private education loan originations of $819 million, increasing 11% from the year-ago quarter.
Share Repurchase Update
In the fourth quarter, the company repurchased 10 million common stocks for $155 million under its share repurchase program.
2023 Outlook
The company expects core earnings per share (on a non-GAAP basis) of $2.50-$2.70.
It anticipates total loan portfolio net charge-offs of $345-$385 million.
Private education loan originations are projected to grow 5-6% year over year.
NIM is expected to be above 5%.
The company’s non-interest expenses are expected to be $610-$620 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -26.38% due to these changes.
VGM Scores
Currently, Sallie Mae has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Sallie Mae has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Sallie Mae (SLM) Down 5.3% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Sallie Mae (SLM - Free Report) . Shares have lost about 5.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Sallie Mae due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Sallie Mae Incurs Q4 Loss as Provisions Jump
Sallie Mae, formally known as SLM Corporation, incurred a core loss per share of 33 cents in the fourth quarter of 2022. The Zacks Consensus Estimate was pegged at earnings of 46 cents. The bottom line also compared unfavorably with the prior-year quarter’s earnings of $1.05. Core earnings per share exclude mark-to-fair value unrealized gains and losses on derivative contracts.
Results were hurt by substantially higher provisions for credit losses, non-interest loss and a rise in non-interest expenses. On the other hand, an increase in net interest income (NII) on higher interest rates and robust loan originations offered some support.
The company’s GAAP net loss attributable to common stock was $80.5 million against net income attributable to common stock of $305.1 million in the previous-year quarter.
In 2022, core income was $1.76 per share, which declined 52% year over year and lagged the consensus estimate of $2.50 by a considerable margin. GAAP net income attributable to common stock was $460 million, down 60.2% from 2021.
NII Improves, Expenses Climb
NII in the fourth quarter was $381.4 million, up 3.8% year over year. Also, the reported figure surpassed the Zacks Consensus Estimate of $358.1 million.
In 2022, NII grew 6.7% to $1.49 billion. The figure also surpassed the consensus estimate of $1.46 billion.
Net interest margin (NIM) expanded 24 basis points to 5.37%.
The company’s non-interest loss was $40.6 million against a non-interest income of $152.8 million in the prior-year quarter. The loss was mainly attributable to net losses on securities and a substantial decline in net gain on the sale of loans.
Sallie Mae's non-interest expenses increased 11.6% to $140.1 million. The increase mainly resulted from higher compensation and benefits and FDIC assessment fees.
Credit Quality Deteriorates
The company recorded a provision for credit losses of $297.3 million against a provision benefit of $15.3 million in the prior-year quarter. Net charge-offs were $117.3 million, up 91.7% from the prior-year quarter.
Balance Sheet Position Robust
As of Dec 31, 2022, deposits of Sallie Mae were $21.45 billion, up modestly on a sequential basis.
Private education loan held for investment was $19.02 billion, up marginally on a sequential basis. In the quarter, the company witnessed private education loan originations of $819 million, increasing 11% from the year-ago quarter.
Share Repurchase Update
In the fourth quarter, the company repurchased 10 million common stocks for $155 million under its share repurchase program.
2023 Outlook
The company expects core earnings per share (on a non-GAAP basis) of $2.50-$2.70.
It anticipates total loan portfolio net charge-offs of $345-$385 million.
Private education loan originations are projected to grow 5-6% year over year.
NIM is expected to be above 5%.
The company’s non-interest expenses are expected to be $610-$620 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -26.38% due to these changes.
VGM Scores
Currently, Sallie Mae has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Sallie Mae has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.