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Why Is Navient (NAVI) Up 9.8% Since Last Earnings Report?
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It has been about a month since the last earnings report for Navient (NAVI - Free Report) . Shares have added about 9.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Navient due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Navient Q2 Earnings Beat Estimates as Provisions Fall
Navient reported second-quarter 2020 core earnings per share of 92 cents that surpassed the Zacks Consensus Estimate of 48 cents. Also, the bottom line was above the year-ago quarter figure of 74 cents.
Core earnings excluded the impacts of certain other one-time items, including mark-to-market gains/losses on derivatives along with goodwill and acquired intangible asset amortization, and impairment.
Second-quarter results of Navient were supported by a rise in net interest income. Also, a fall in expenses and provisions were tailwinds. However, private education loans declined. Moreover, year-over-year decline in fee income was an undermining factor.
GAAP net income for the quarter was $125 million or 64 cents per share compared with $153 million or 64 cents per share in the year-ago quarter.
Net interest income Increase, Provisions Fall (on Core Earnings Basis)
Net interest income (NII) increased 11.1% year over year to $329 million.
Non-interest income declined 32.6% year over year to $163 million. The fall was mainly attributed to lower asset recovery and business processing along with servicing revenues.
Provision for loan losses fell 35.3% year over year to $44 million.
Total expenses declined 11.6% from the year-ago quarter to $214 million. Lower operating expenses mainly led to the fall.
Segment Performance
Federal Education Loans: The segment generated core earnings of $87 million, up 11.5% year over year. Higher revenues along with a fall in expenses posed as tailwinds.
As of Jun 30, 2020, the company’s FFELP loans were $60.9 billion, down 2.5% sequentially.
Consumer Lending: The segment reported core earnings of $54 million, up 2.4% year over year. Lower provisions and rise in revenues were the positives. Net interest margin was 3.2%, down 2 basis points.
Private education loan delinquencies of 30 days or more of $426 million were down $644 million from the prior-year quarter.
As of Jun 30, 2020, the company’s private education loans totaled $21.5 billion, down 3.9% from the prior quarter. Also, Navient originated $238 million of private education refinance loans in the quarter.
Business Processing: The segment reported core earnings of $6 million compared with $7 million in the year-ago quarter. Higher expenses and a fall in revenues led to the decline.
Source of Funding and Liquidity
In order to meet liquidity needs, Navient expects to utilize various sources, including cash and investment portfolio, issuance of additional unsecured debt, repayment of principal on unencumbered student-loan assets, and distributions from securitization trusts (including servicing fees). It might also issue term asset-backed securities (“ABS”).
During the reported quarter, Navient issued $1.3 billion in term ABS. Notably, it had $1.6 billion of cash as of Jun 30, 2020.
Capital-Deployment Activities
In the second quarter, the company paid out $31 million in common stock dividends. As of Jun 30, 2020, it had $665 million of remaining share-repurchase authority.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 38.56% due to these changes.
VGM Scores
Currently, Navient has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Navient has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Navient (NAVI) Up 9.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Navient (NAVI - Free Report) . Shares have added about 9.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Navient due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Navient Q2 Earnings Beat Estimates as Provisions Fall
Navient reported second-quarter 2020 core earnings per share of 92 cents that surpassed the Zacks Consensus Estimate of 48 cents. Also, the bottom line was above the year-ago quarter figure of 74 cents.
Core earnings excluded the impacts of certain other one-time items, including mark-to-market gains/losses on derivatives along with goodwill and acquired intangible asset amortization, and impairment.
Second-quarter results of Navient were supported by a rise in net interest income. Also, a fall in expenses and provisions were tailwinds. However, private education loans declined. Moreover, year-over-year decline in fee income was an undermining factor.
GAAP net income for the quarter was $125 million or 64 cents per share compared with $153 million or 64 cents per share in the year-ago quarter.
Net interest income Increase, Provisions Fall (on Core Earnings Basis)
Net interest income (NII) increased 11.1% year over year to $329 million.
Non-interest income declined 32.6% year over year to $163 million. The fall was mainly attributed to lower asset recovery and business processing along with servicing revenues.
Provision for loan losses fell 35.3% year over year to $44 million.
Total expenses declined 11.6% from the year-ago quarter to $214 million. Lower operating expenses mainly led to the fall.
Segment Performance
Federal Education Loans: The segment generated core earnings of $87 million, up 11.5% year over year. Higher revenues along with a fall in expenses posed as tailwinds.
As of Jun 30, 2020, the company’s FFELP loans were $60.9 billion, down 2.5% sequentially.
Consumer Lending: The segment reported core earnings of $54 million, up 2.4% year over year. Lower provisions and rise in revenues were the positives. Net interest margin was 3.2%, down 2 basis points.
Private education loan delinquencies of 30 days or more of $426 million were down $644 million from the prior-year quarter.
As of Jun 30, 2020, the company’s private education loans totaled $21.5 billion, down 3.9% from the prior quarter. Also, Navient originated $238 million of private education refinance loans in the quarter.
Business Processing: The segment reported core earnings of $6 million compared with $7 million in the year-ago quarter. Higher expenses and a fall in revenues led to the decline.
Source of Funding and Liquidity
In order to meet liquidity needs, Navient expects to utilize various sources, including cash and investment portfolio, issuance of additional unsecured debt, repayment of principal on unencumbered student-loan assets, and distributions from securitization trusts (including servicing fees). It might also issue term asset-backed securities (“ABS”).
During the reported quarter, Navient issued $1.3 billion in term ABS. Notably, it had $1.6 billion of cash as of Jun 30, 2020.
Capital-Deployment Activities
In the second quarter, the company paid out $31 million in common stock dividends. As of Jun 30, 2020, it had $665 million of remaining share-repurchase authority.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 38.56% due to these changes.
VGM Scores
Currently, Navient has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Navient has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.