Sallie Mae (SLM)

Sallie Mae, or SLM Corp.'s (SLM - Analyst Report) fourth-quarter 2011 core earnings were a penny above the Zacks Consensus Estimate. Improvements in net interest income, loan loss provision, expenses and discontinued operations supported the core earnings figure. Recently, the company announced a dividend hike and a new share repurchases authorization.

We believe that such shareholder-friendly efforts will give a boost to investors confidence in the stock. Moreover, its leading position in the student lending market, cost curtailment initiatives and the federal student loan assets acquisition augur well. Though pausing new federal student loan origination to comply with the legislation would affect revenue generation at the company, we believe that its diversifying efforts coupled with an economic recovery, though at a sluggish pace, will bolster its earnings.

Our six-month target price of $18.00 equates with 8.7x our earnings estimate for 2012. Combined with a quarterly dividend of $0.125 per share, this target price implies an expected total return of about 22.1% over that period. This is consistent with our Outperform recommendation on the shares.

Sallie Mae (SLM) : FULL ANALYST REPORT

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Read the full analyst report on SLM