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Navient (NAVI) Up 8.3% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Navient (NAVI - Free Report) . Shares have added about 8.3% 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 Reports Q4 Loss, Surpasses NII Estimates

Navient reported the fourth-quarter 2021 core loss per share of 43 cents against the Zacks Consensus Estimate of earnings per share (EPS) of 85 cents. The reported figure excludes 36 cents from non-recurring items.

A fall in net interest income (NII) and non-interest income, as well as higher expenses, hindered the results. Also, a rise in provisions was a headwind. The firm recorded regulatory expenses of nearly $170 million on an after-tax basis.

Navient’s GAAP net loss was $11 million against the net income of $186 million seen in the prior year.

For the full year, EPS (core earnings basis) was $3.21, comparing unfavorably with the year-ago earnings of $3.24 per share. Net income available to common shareholders was $717 million, up from $412 million in 2020.

NII Decreases, Provisions and Expenses Flare Up

NII declined 8.5% year over year to $314 million in fourth-quarter 2021. Nonetheless, the reported figure surpassed the Zacks Consensus Estimate of $287.7 million.

In 2021, adjusted NII was $1.26 billion. It compares favorably with $1.10 billion recorded in the year-ago quarter. Also, the top line surpassed the Zacks Consensus Estimate of $1.17 billion.

Non-interest income fell 2% to $165 million. The downside mainly stemmed from lower servicing revenues.

Provision for loan losses was an expense of $5 million, marking a year-over-year rise from $2 million witnessed in the prior-year quarter.

Total expenses flared up 76% to $482 million. Higher operating expenses, and a rise in goodwill and acquired intangible asset impairment and amortization expenses primarily resulted in the upswing.

Segmental Performance

Federal Education Loans: The segment generated core earnings of $108 million, down 19.4% year over year.

As of Dec 31, 2021, the company’s net FFELP loans were $52.6 billion, down 3.1% sequentially.

Consumer Lending: The segment reported core earnings of $89 million, which decreased 17.6% from the year-ago quarter. Higher provision for loan losses affected the segment’s performance.

Private education loan delinquencies of 30 days or more of $650 million were up 17.3% from the prior-year quarter.

As of Dec 31, 2021, the company’s private education loans totaled $20.2 billion, up marginally from the prior quarter. In addition, Navient originated $1.37 billion of private education refinance loans in the reported quarter.

Business Processing: The segment reported core earnings of $17 million, up 13.3% from $15 million recorded in the year-ago quarter. Higher fee revenues led to the upside.


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, the 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 asset-backed securities (ABS), enter into additional Private Education Loan ABS repurchase facilities, or issue additional unsecured debt.

Notably, it had $905 million of total unrestricted cash and liquid investments as of Dec 31, 2021.

Capital Deployment Activities

In the fourth quarter, the company paid out $25 million in common stock dividends.

In the reported quarter, Navient repurchased shares of common stock for $150 million. As of Dec 31, 2021, there was $1 billion of the remaining share-repurchase authority.

2022 Outlook

Non-GAAP EPS is expected in the range of $3-$3.15 per share.

Non-GAAP core earnings ROE is expected in mid to high teens.

Non- GAAP core earnings efficiency ratio is projected to be nearly 54%.

Management expects the non-GAAP adjusted tangible equity ratio to be nearly 6%.

For the Federal Education Loan segment, the company anticipates NIM in mid-90s and the charge-off rate to be less than 0.10%.

For the Consumer Lending segment, management estimates NIM in the range of 2.55-2.65%. The charge-off rate is expected in the range of 1.5-2%.

Non-GAAP earnings before interest, taxes, depreciation and amortization (EBITDA) margin for the Business Processing segment is projected in high teens.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

The consensus estimate has shifted 10.88% due to these changes.

VGM Scores

Currently, Navient has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.


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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