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Why Is Navient (NAVI) Up 11.8% Since Last Earnings Report?
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A month has gone by since the last earnings report for Navient (NAVI - Free Report) . Shares have added about 11.8% 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 the most recent earnings report in order to get a better handle on the important drivers.
Navient Q3 Earnings & NII Miss Estimates, Costs Dip
Navient’s third-quarter 2022 adjusted core earnings per share (excluding regulatory and restructuring charges) of 75 cents missed the Zacks Consensus Estimate of 77 cents. Also, the bottom line declined 18.5% on a year-over-year basis.
The results of Navient were affected by the fall in non-interest income and net interest income (NII). An increase in the provision for loan losses also dragged the results. Nonetheless, lower expenses aided the company.
Navient’s GAAP net income was $105 million, down from $173 million in the prior-year quarter.
NII & Expenses Decrease, Provisions Rise
NII (on a non-GAAP basis) was $247 million, down 17.4% year over year. The reported figure missed the Zacks Consensus Estimate of $291.7 million.
Total other income fell 6% to $150 million.
Provision for loan losses was $28 million higher than $22 million in the prior-year quarter.
Total expenses declined 11% to $225 million. This was primarily due to a fall in operating expenses.
Segmental Performance
Federal Education Loans: The segment generated a net income of $94 million, down 23% year over year.
As of Sep 30, 2022, the company’s net FFELP loans were $46.89 billion, down 4.7% sequentially.
Consumer Lending: The segment reported a net income of $65 million, which decreased 11% from the year-ago quarter.
As of Sep 30, 2022, the company’s net private education loans totaled $19.15 billion, down 2.6% from the prior quarter. Navient originated $231 million of private education refinance loans.
Business Processing: The segment reported a net income of $9 million, down 66.7% from the year-ago quarter.
Capital Deployment Activities
In the third quarter, the company paid out $22 million in common stock dividends.
In the reported quarter, Navient repurchased $95 million of common stock. As of Sep 30, 2022, there was $685 million of the remaining share repurchase authority.
2022 Outlook
Adjusted core EPS (excluding restructuring charges) is expected to be $3.35-$3.45.
Core earnings ROE is expected in the mid to high-teens range.
The core earnings efficiency ratio is projected to be 54%.
Management expects the adjusted tangible equity ratio to be 6%.
For the Federal Education Loan segment, the company anticipates NIM in the mid-90s and the charge-off rate to be less than 0.10%.
For the Consumer Lending segment, management estimates NIM of 2.55-2.65%. The charge-off rate is expected to be 1.5-2%.
Non-GAAP earnings before interest, taxes, depreciation and amortization (EBITDA) margin for the Business Processing segment is projected in the high teens.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 5.81% due to these changes.
VGM Scores
Currently, 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 second 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.
Outlook
Estimates have been 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.
Performance of an Industry Player
Navient belongs to the Zacks Financial - Consumer Loans industry. Another stock from the same industry, Discover (DFS - Free Report) , has gained 6.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Discover reported revenues of $3.48 billion in the last reported quarter, representing a year-over-year change of +25.3%. EPS of $3.54 for the same period compares with $3.54 a year ago.
Discover is expected to post earnings of $3.60 per share for the current quarter, representing a year-over-year change of -1.1%. Over the last 30 days, the Zacks Consensus Estimate has changed +4%.
Discover has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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Why Is Navient (NAVI) Up 11.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Navient (NAVI - Free Report) . Shares have added about 11.8% 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 the most recent earnings report in order to get a better handle on the important drivers.
Navient Q3 Earnings & NII Miss Estimates, Costs Dip
Navient’s third-quarter 2022 adjusted core earnings per share (excluding regulatory and restructuring charges) of 75 cents missed the Zacks Consensus Estimate of 77 cents. Also, the bottom line declined 18.5% on a year-over-year basis.
The results of Navient were affected by the fall in non-interest income and net interest income (NII). An increase in the provision for loan losses also dragged the results. Nonetheless, lower expenses aided the company.
Navient’s GAAP net income was $105 million, down from $173 million in the prior-year quarter.
NII & Expenses Decrease, Provisions Rise
NII (on a non-GAAP basis) was $247 million, down 17.4% year over year. The reported figure missed the Zacks Consensus Estimate of $291.7 million.
Total other income fell 6% to $150 million.
Provision for loan losses was $28 million higher than $22 million in the prior-year quarter.
Total expenses declined 11% to $225 million. This was primarily due to a fall in operating expenses.
Segmental Performance
Federal Education Loans: The segment generated a net income of $94 million, down 23% year over year.
As of Sep 30, 2022, the company’s net FFELP loans were $46.89 billion, down 4.7% sequentially.
Consumer Lending: The segment reported a net income of $65 million, which decreased 11% from the year-ago quarter.
As of Sep 30, 2022, the company’s net private education loans totaled $19.15 billion, down 2.6% from the prior quarter. Navient originated $231 million of private education refinance loans.
Business Processing: The segment reported a net income of $9 million, down 66.7% from the year-ago quarter.
Capital Deployment Activities
In the third quarter, the company paid out $22 million in common stock dividends.
In the reported quarter, Navient repurchased $95 million of common stock. As of Sep 30, 2022, there was $685 million of the remaining share repurchase authority.
2022 Outlook
Adjusted core EPS (excluding restructuring charges) is expected to be $3.35-$3.45.
Core earnings ROE is expected in the mid to high-teens range.
The core earnings efficiency ratio is projected to be 54%.
Management expects the adjusted tangible equity ratio to be 6%.
For the Federal Education Loan segment, the company anticipates NIM in the mid-90s and the charge-off rate to be less than 0.10%.
For the Consumer Lending segment, management estimates NIM of 2.55-2.65%. The charge-off rate is expected to be 1.5-2%.
Non-GAAP earnings before interest, taxes, depreciation and amortization (EBITDA) margin for the Business Processing segment is projected in the high teens.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 5.81% due to these changes.
VGM Scores
Currently, 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 second 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.
Outlook
Estimates have been 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.
Performance of an Industry Player
Navient belongs to the Zacks Financial - Consumer Loans industry. Another stock from the same industry, Discover (DFS - Free Report) , has gained 6.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Discover reported revenues of $3.48 billion in the last reported quarter, representing a year-over-year change of +25.3%. EPS of $3.54 for the same period compares with $3.54 a year ago.
Discover is expected to post earnings of $3.60 per share for the current quarter, representing a year-over-year change of -1.1%. Over the last 30 days, the Zacks Consensus Estimate has changed +4%.
Discover has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.