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Navient (NAVI) Down 8.4% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Navient Corporation (NAVI - Free Report) . Shares have lost about 8.4% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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.
Navient Beats Q2 Earnings on High Non-Interest Income
Navient’s second-quarter 2017 adjusted core earnings per share (EPS) of $0.43 surpassed the Zacks Consensus Estimate of $0.41. However, the figure came below the year-ago quarter tally. The reported EPS for the quarter includes the effect of regulatory-related costs.
Core earnings excluded the impact of losses from the derivative accounting treatment. It also excluded the impact of certain other one-time items, including unrealized, mark-to-market gains /losses on derivatives, and goodwill and acquired intangible asset amortization and impairment.
Better-than-expected results of Navient reflect higher non-interest income and lower provision for credit losses. However, on the downside, the company recorded reduced net interest income (NII).
Net income came in at $123 million in the second quarter, down from $154 million in the prior-year quarter.
GAAP net income for the quarter was $112 million or $0.39 per share compared with $125 million or $0.38 per share in the year-ago quarter.
Rise in Fee Income and Lower Provisions More Than Offset Decline in NII (on core earnings basis)
Net interest income declined 15.9% year over year to $343 million.
However, non-interest income jumped 5.1% year over year to $185 million. Asset recovery revenues rose while servicing revenues declined.
Further, provision for credit losses decreased 4.5% year over year to $105 million.
Total expenses were flat year over year at $230 million.
Segment Performance
FFELP: The segment generated core earnings of $57 million, down 16.2% year over year. The underperformance was mainly due to lower net interest income owing to amortization of the portfolio and also a decrease in net interest margin (NIM), partially offset by a decline in operating expenses.
FFELP loan spread contracted 4 basis points (bps) year over year to 0.89%.
During the quarter, Navient acquired FFELP loans of $4 million. As of Jun 30, 2017, the company’s FFELP loans were $86.1 billion, down 6.9% year over year.
Private Education Loans: The segment reported core earnings of $39 million, down 31.6% year over year. The decrease was due to lower net interest income owing to amortization of the portfolio and lower NIM.
Total delinquency rate came in at 6%, down 1 bp. Charge-off rate of 2.3% of average loans in repayment was 1 bp higher on a year-over-year basis. Student loan spread contracted 18 bps year over year to 3.48%.
As of Jun 30, 2017, the company’s private education loans totaled $24.2 billion, down 2% year over year.
Business Services: The segment reported core earnings of $81 million, same as the prior-year quarter figure.
Currently, Navient services student loans for over 12 million customers. This includes 6 million customers on behalf of the U.S. Department of Education.
Other: The segment reported a net loss of $54 million compared with a net loss of $52 million in the prior-year quarter.
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 may also issue term asset-backed securities (ABS).
During the reported quarter, Navient issued $1 billion in FFELP Loan ABS and $552 million in unsecured loan debt. Also, the company retired or repurchased $254 million of senior unsecured debt during the quarter.
Share Repurchase
During the quarter, Navient repurchased 10.9 million shares of common stock for $165 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter.
At this time, Navient's stock has a poor Growth Score of F, however its Momentum is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, stocks has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.
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Navient (NAVI) Down 8.4% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Navient Corporation (NAVI - Free Report) . Shares have lost about 8.4% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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.
Navient Beats Q2 Earnings on High Non-Interest Income
Navient’s second-quarter 2017 adjusted core earnings per share (EPS) of $0.43 surpassed the Zacks Consensus Estimate of $0.41. However, the figure came below the year-ago quarter tally. The reported EPS for the quarter includes the effect of regulatory-related costs.
Core earnings excluded the impact of losses from the derivative accounting treatment. It also excluded the impact of certain other one-time items, including unrealized, mark-to-market gains /losses on derivatives, and goodwill and acquired intangible asset amortization and impairment.
Better-than-expected results of Navient reflect higher non-interest income and lower provision for credit losses. However, on the downside, the company recorded reduced net interest income (NII).
Net income came in at $123 million in the second quarter, down from $154 million in the prior-year quarter.
GAAP net income for the quarter was $112 million or $0.39 per share compared with $125 million or $0.38 per share in the year-ago quarter.
Rise in Fee Income and Lower Provisions More Than Offset Decline in NII (on core earnings basis)
Net interest income declined 15.9% year over year to $343 million.
However, non-interest income jumped 5.1% year over year to $185 million. Asset recovery revenues rose while servicing revenues declined.
Further, provision for credit losses decreased 4.5% year over year to $105 million.
Total expenses were flat year over year at $230 million.
Segment Performance
FFELP: The segment generated core earnings of $57 million, down 16.2% year over year. The underperformance was mainly due to lower net interest income owing to amortization of the portfolio and also a decrease in net interest margin (NIM), partially offset by a decline in operating expenses.
FFELP loan spread contracted 4 basis points (bps) year over year to 0.89%.
During the quarter, Navient acquired FFELP loans of $4 million. As of Jun 30, 2017, the company’s FFELP loans were $86.1 billion, down 6.9% year over year.
Private Education Loans: The segment reported core earnings of $39 million, down 31.6% year over year. The decrease was due to lower net interest income owing to amortization of the portfolio and lower NIM.
Total delinquency rate came in at 6%, down 1 bp. Charge-off rate of 2.3% of average loans in repayment was 1 bp higher on a year-over-year basis. Student loan spread contracted 18 bps year over year to 3.48%.
As of Jun 30, 2017, the company’s private education loans totaled $24.2 billion, down 2% year over year.
Business Services: The segment reported core earnings of $81 million, same as the prior-year quarter figure.
Currently, Navient services student loans for over 12 million customers. This includes 6 million customers on behalf of the U.S. Department of Education.
Other: The segment reported a net loss of $54 million compared with a net loss of $52 million in the prior-year quarter.
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 may also issue term asset-backed securities (ABS).
During the reported quarter, Navient issued $1 billion in FFELP Loan ABS and $552 million in unsecured loan debt. Also, the company retired or repurchased $254 million of senior unsecured debt during the quarter.
Share Repurchase
During the quarter, Navient repurchased 10.9 million shares of common stock for $165 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter.
Navient Corporation Price and Consensus
Navient Corporation Price and Consensus | Navient Corporation Quote
VGM Scores
At this time, Navient's stock has a poor Growth Score of F, however its Momentum is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, stocks has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.