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What's in the Offing for Navient (NAVI) in Q4 Earnings?

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Navient Corporation (NAVI - Free Report) is scheduled to report fourth quarter and 2020 results on Jan 26, after market close. While its earnings are expected to have improved year over year, revenues might have declined.

This Wilmington, DE-based lender’s third-quarter 2020 earnings surpassed the Zacks Consensus Estimate on a rise in net interest income (NII). Also, lower expenses and provisions were tailwinds. However, decline in fee income was an undermining factor.

Notably, the company has an impressive surprise history. Navient outpaced earnings estimates in three of the trailing four quarters and lagged in one, with the positive surprise being 26.74%, on average.

Navient Corporation Price and EPS Surprise

Navient Corporation Price and EPS Surprise

Navient Corporation price-eps-surprise | Navient Corporation Quote

The Zacks Consensus Estimate for earnings of 82 cents has been revised upward over the past seven days. Also, it indicates a rise of 22.4% from the year-ago reported figure. However, the consensus estimate for sales of $284.2 million indicates a 3.4% year-over-year decline.

Factors at Play

Decline in NII: Per the Fed’s latest data, the consumer lending scenario remained muted during the quarter. Thus, Navient’s overall loan balances are less likely to have received support.

Also, the company’s NII is expected to have declined in the quarter because of lower interest rates. Notably, the Federal Reserve continued to keep interest rates at near-zero to protect the economy from the impacts of the coronavirus outbreak.

The Zacks Consensus Estimate of $282 million for NII indicates a decline of 4.1% from the prior-year quarter.

Lower Non-Interest Income: Looking at the fee income components, the Zacks Consensus Estimate of $115 million for asset recovery revenues indicates a fall of 7.3% from the prior year. The consensus estimate for servicing revenues suggests a year-over-year decline of 6.9%.

Overall, the consensus estimate for fee income of $205 million indicates a fall of 6.4%.

Elevated Expenses: Navient’s initiatives to become a technologically advanced company and its aim to expand services outside the educational industry are likely to have resulted in elevated expenses.

What Our Model Unveils

Our quantitative model doesn’t 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 -0.82%.

Zacks Rank: The company currently carries a Zacks Rank of 1 (Strong Buy).

Stocks That Warrant a Look

Here are some stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

CullenFrost Bankers, Inc. (CFR - Free Report) is scheduled to release quarterly earnings on Jan 28. The company, which sports a Zacks Rank #1 currently, has an Earnings ESP of +4.50%. You can see the complete list of today’s Zacks #1 Rank stocks here.

New York Community Bancorp, Inc. (NYCB - Free Report) is set to release quarterly results on Jan 27. The company currently has an Earnings ESP of +4.25% and a Zacks Rank of 3.

The Earnings ESP for Hilltop Holdings Inc. (HTH - Free Report) is +9.80% and the company carries a Zacks Rank #1, currently. It is scheduled to report quarterly numbers on Jan 28.

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