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Navient (NAVI) Up 7.2% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Navient (NAVI - Free Report) . Shares have added about 7.2% 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 its most recent earnings report in order to get a better handle on the important drivers.

Navient Q3 Earnings Beat Estimates, Expenses Flare Up

Navient reported third-quarter 2021 core earnings per share of 89 cents, surpassing the Zacks Consensus Estimate of 83 cents. Nonetheless, the bottom line came in lower than the year-ago quarter figure of 99 cents.

Core earnings exclude the impacts of certain other one-time items, including the mark-to-market gains/losses on derivatives, along with goodwill and acquired intangible asset amortization, and impairment.

The company’s performance was supported by strong loan originations and business processing operations. However, fall in net interest income (NII) and non-interest income, as well as higher expenses are concerns. Also, rise in provisions was a headwind.

Navient’s GAAP net income came in at $173 million or $1.04 per share compared with the net income of $207 million or $1.07 per share seen in the prior year.

NII Decreases, Provisions and Expenses Flare Up (on Core Earnings Basis)

The NII edged down 1% year over year to $334 million.

Non-interest income fell 10% to $160 million. This downside mainly stemmed from the losses on debt repurchases, losses on derivative and hedging activities and lower servicing revenue.

Provision for loan losses was a provision of $22 million, marking a year-over -year rise of 57% from the $14 million witnessed in the prior-year quarter.

Total expenses flared up 5% to $252 million. Higher operating expenses and rise in goodwill and acquired intangible asset impairment and amortization expenses primarily resulted in this upswing.

Segment Performance

Federal Education Loans: The segment generated core earnings of $122 million, down 11% year over year. Lower revenues were partly offset by a fall in expenses.

As of Sep 30, 2021, the company’s FFELP loans were $54.4 billion, down 2.2% sequentially.

Consumer Lending: The segment reported core earnings of $73 million, which decreased 34% from the year-ago quarter’s $110 million. Provision for loan losses and rise in expenses led to a dip in the segment’s performance. Net interest margin was 2.98%, shrinking 26 basis points.

Private education loan delinquencies of 30 days or more of $599 million were up 20% from the prior-year quarter.

As of Sep 30, 2021, the company’s private education loans totaled $20 billion, up 1.5% from the prior quarter. In addition, Navient originated $1.49 billion of private education refinance loans during the reported quarter.

Business Processing: The segment reported core earnings of $27 million, up 69% from the $16 million recorded in the year-ago quarter. Higher fee revenues led to this upside.

Source of Funding and Liquidity

In order to meet liquidity needs, Navient expects to utilize various sources, including cash and investment portfolio, the predictable operating cash flows provided by operating activities, repayment of principal on unencumbered student-loan assets, and distributions from securitization trusts. It might also draw down on the secured FFELP Loan and Private Education Loan facilities, issue term ABS, enter into additional Private Education Loan asset-backed securities (ABS) repurchase facilities, or issue additional unsecured debt.

During the reported quarter, Navient issued $2 billion in term ABS and retired $757 million in unsecured debt. Notably, it had $1.05 billion of cash as of Sep 30, 2021.

Capital Deployment Activities

In the third quarter, the company paid out $26 million in common stock dividends.

During the reported quarter, Navient repurchased shares of common stock for $150 million. As of Sep 30, 2021, there was $150 million of the remaining share-repurchase authority.


As a greater number of borrowers will transition into repaying statuses, management expects delinquency levels to revert toward the pre-pandemic levels. Management expects the delinquency rate to be in the mid- to low 3% range. Charge-offs which are also contingent on the product mix, are expected to be in the low 1% range.

Fourth Quarter

Management expects the pandemic related contract expirations to continue to abate and reduce revenues in the Business Processing segment by 20% sequentially.


More than $5.5 billion in combined refinancing and in-school originations in 2021 is expected.

2021 earnings (on core earnings basis) are expected to be atleast $4.5 per share, an increase of more than 40% compared to original guidance. The outlook excludes regulatory and restructuring costs, reflects a current interest-rate environment and includes the announced debt repurchases and utilizing the remaining share repurchase authority of $150 million.


For 2022, management anticipates incurring certain ongoing expense for the contract in conjunction with the transition services agreement, for which it will receive offsetting revenue payments. As the company manages the Maximus transition, it anticipates the impact from the transfer of the contract to result in less than 10 cents in earnings per share for 2022.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Navient has a poor Growth Score of F, however its Momentum Score 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, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly 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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