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What to Expect From Navient (NAVI) This Earnings Season?

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Navient Corporation (NAVI - Free Report) is scheduled to report second-quarter 2021 results on Jul 28, after market close. The company’s earnings as well as revenues are expected to have decreased on a year-over-year basis.

This Wilmington, DE-based lender’s first-quarter 2021 earnings surpassed the Zacks Consensus Estimate, primarily backed by provision benefit and rise in non interest income. However, private education loans declined. A fall in net interest income (NII) acted as a headwind.

Notably, the company has an impressive surprise history. Navient outpaced earnings estimates in all of the trailing four quarters, the average earnings surprise being 61.62%.

Navient Corporation Price and EPS Surprise

Navient Corporation Price and EPS Surprise

Navient Corporation price-eps-surprise | Navient Corporation Quote

Activities of the company during the to-be-reported quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of 85 cents has been unchanged over the past 30 days. It indicates a fall of 7.61% from the year-ago reported figure. Further, the consensus estimate for revenues of $267.1 million suggests an 18.80% year-over-year fall.

Key Factors to Note

Decline in NII: Per the Fed’s latest data, the overall lending scenario was soft during the April-June quarter, with weak home equity, and commercial and industrial loans. Conversely, real estate, commercial real estate, as well as consumer loan portfolios might have offered support.

This, along with flattening of the yield curve and interest rates remaining at near-zero level in order to protect the economy from the impacts of the pandemic, might have dented the company’s net interest margin, thereby impacting its NII.

Lower Non-Interest Income: Weakness in fee income might have kept Navient’s top line under pressure during the to-be-reported quarter. The Zacks Consensus Estimate of $51 million for servicing revenues calls for a decline of 3.8% from the previous quarter. The consensus estimate for asset recovery revenues suggests a fall of 7.2%.

Elevated Expenses: Navient’s initiatives to become a technologically-advanced company and its aim to expand services outside the education industry are likely to have inflated expenses.

Here is what our quantitative model predicts:

Our quantitative model does not 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 0.00%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

Stocks That Warrant a Look

Here are a few bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

T. Rowe Price Group (TROW - Free Report) is scheduled to release earnings on Jul 29. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +1.34%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for Prosperity Bancshares (PB - Free Report) is +1.52% and it carries a Zacks Rank #2 (Buy), at present. The company is set to report quarterly numbers on Jul 28.

Evercore (EVR - Free Report) is slated to announce quarterly results on Jul 28. The company currently has an Earnings ESP of +4.84% and a Zacks Rank of 2.