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Why Is Sallie Mae (SLM) Up 4.9% Since Last Earnings Report?
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A month has gone by since the last earnings report for Sallie Mae (SLM - Free Report) . Shares have added about 4.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Sallie Mae 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 drivers.
Sallie Mae Q1 Earnings Top Estimates as Expenses Fall
Sallie Mae first-quarter 2021 earnings per share of $1.77 (on core basis) handily surpassed the Zacks Consensus Estimate of $1. Also, the bottom line compared favorably with 79 cents reported in the prior-year quarter.
Results benefited from the company’s prudent cost management and improved fee income. Also, benefit from loan losses was a tailwind. However, lower net interest income on fall in rates posed a major undermining factor.
The company’s GAAP net income attributable to common stock was $640 million or $1.75 compared with $359 million or 87 cents a year ago.
Net Interest Income Declines, Expenses Fall
Net interest income in the first quarter was $331.1 million, down 17.2% year over year. The decline is attributable to sale of private education and personal loan portfolios. Net interest margin contracted to 4.40% from 5.08% in the year-ago quarter.
The company’s non-interest income was $413.4 million, up 41.5% the prior-year quarter. The rise mainly stemmed from higher other income and gain on sales of loans.
The company’s non-interest expenses fell 14.7% year over year to $125.6 million. The fall mainly resulted from lower FDIC assessment fees, compensation and benefits and other operating expenses, partly offset by higher restructuring expenses.
Credit Quality Improved
The company recorded a benefit from loan losses of $225.8 million against provisions of $61.3 million in the prior-year quarter.
Delinquencies as a percentage of private education loans in repayment were 2.1%, down from 3.2%.
Loans & Deposits Increase
As of Mar 31, 2021, deposits of Sallie Mae were $22.8 billion, up slightly from $22.7 billion as of Dec 31, 2020. Higher brokered deposits contributed to the upside.
Private education loan held for investment (96% of total loans) was $19.6 billion, up 6.5% on a sequential basis. During the quarter, the company witnessed private education loan originations of $2.1 billion.
Capital Deployment Activities
During the quarter, the company repurchased $592 million of common stock under its share repurchase programs.
Outlook 2021
The company expects earnings per share (on GAAP basis) to be between $2.95 and $3.15.
Total portfolio net charge-offs of $260-$280 million are anticipated for full-year 2021.
Private education loan originations are projected to grow 6-7% year over year.
The company’s non-interest expenses are expected to fall in the $525-$535 million band.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 17.82% due to these changes.
VGM Scores
At this time, Sallie Mae has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock 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.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Sallie Mae has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is Sallie Mae (SLM) Up 4.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Sallie Mae (SLM - Free Report) . Shares have added about 4.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Sallie Mae 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 drivers.
Sallie Mae Q1 Earnings Top Estimates as Expenses Fall
Sallie Mae first-quarter 2021 earnings per share of $1.77 (on core basis) handily surpassed the Zacks Consensus Estimate of $1. Also, the bottom line compared favorably with 79 cents reported in the prior-year quarter.
Results benefited from the company’s prudent cost management and improved fee income. Also, benefit from loan losses was a tailwind. However, lower net interest income on fall in rates posed a major undermining factor.
The company’s GAAP net income attributable to common stock was $640 million or $1.75 compared with $359 million or 87 cents a year ago.
Net Interest Income Declines, Expenses Fall
Net interest income in the first quarter was $331.1 million, down 17.2% year over year. The decline is attributable to sale of private education and personal loan portfolios. Net interest margin contracted to 4.40% from 5.08% in the year-ago quarter.
The company’s non-interest income was $413.4 million, up 41.5% the prior-year quarter. The rise mainly stemmed from higher other income and gain on sales of loans.
The company’s non-interest expenses fell 14.7% year over year to $125.6 million. The fall mainly resulted from lower FDIC assessment fees, compensation and benefits and other operating expenses, partly offset by higher restructuring expenses.
Credit Quality Improved
The company recorded a benefit from loan losses of $225.8 million against provisions of $61.3 million in the prior-year quarter.
Delinquencies as a percentage of private education loans in repayment were 2.1%, down from 3.2%.
Loans & Deposits Increase
As of Mar 31, 2021, deposits of Sallie Mae were $22.8 billion, up slightly from $22.7 billion as of Dec 31, 2020. Higher brokered deposits contributed to the upside.
Private education loan held for investment (96% of total loans) was $19.6 billion, up 6.5% on a sequential basis. During the quarter, the company witnessed private education loan originations of $2.1 billion.
Capital Deployment Activities
During the quarter, the company repurchased $592 million of common stock under its share repurchase programs.
Outlook 2021
The company expects earnings per share (on GAAP basis) to be between $2.95 and $3.15.
Total portfolio net charge-offs of $260-$280 million are anticipated for full-year 2021.
Private education loan originations are projected to grow 6-7% year over year.
The company’s non-interest expenses are expected to fall in the $525-$535 million band.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 17.82% due to these changes.
VGM Scores
At this time, Sallie Mae has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock 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.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Sallie Mae has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.