A month has gone by since the last earnings report for Sallie Mae (SLM Quick QuoteSLM - Free Report) . Shares have added about 1.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is 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 its most recent earnings report in order to get a better handle on the important catalysts.

Sallie Mae Q1 Earnings and NII Beat Estimates

Sallie Mae reported first-quarter 2023 core earnings per share of 47 cents, beating the Zacks Consensus Estimate of 35 cents. The bottom line compared unfavorably with the prior-year quarter’s earnings of 46 cents. Core earnings per share exclude mark-to-fair value unrealized gains and losses on derivative contracts.

Results were aided by lower provisions for credit losses, an increase in NII on higher interest rates and robust loan originations. A rise in non-interest expenses was worrisome.

The company’s GAAP net income was $119 million, down 8% from the previous-year quarter.

NII Improves, Expenses Climb

NII in the first quarter was $405.1 million, up 8% year over year. Also, the reported figure surpassed the Zacks Consensus Estimate of $373.7 million.

The net interest margin (NIM) expanded 41 basis points to 5.70%.

The company’s non-interest income of $22 million was flat from the prior-year quarter. This was mainly attributable to net gains on securities and a substantial decline in net gain on the sale of loans.

Sallie Mae's non-interest expenses increased 17.4% to $155 million. The increase mainly resulted from higher compensation and benefits, and FDIC assessment fees.

Credit Quality Mixed

The company recorded a provision for credit losses of $114 million compared with $375 million in the prior-year quarter. Net charge-offs for private education loans were $83 million. Net charge-offs as a percentage of average private education loans held for investment in repayment (annualized) was 2.1%, up from 1.9% year over year.

Balance Sheet Position Robust

As of Mar 31, 2023, deposits of Sallie Mae were $21.80 billion, up 1.6% on a sequential basis.

Private education loan held for investment was $20.49 billion, up 7.7% on a sequential basis. In the quarter, the company witnessed private education loan originations of $2.4 billion, increasing 12% from the year-ago quarter.

Share Repurchase Update

In the first quarter, the company did not repurchase common stocks under its existing share repurchase program.

2023 Outlook

The company expects core earnings per share (on a non-GAAP basis) of $2.50-$2.70.

It anticipates total loan portfolio net charge-offs of $345-$385 million.

Private education loan originations are projected to grow 5-6% year over year.

NIM in 2023 is expected to be slightly higher than that reported in 2022.

The company’s non-interest expenses are expected to be $610-$620 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

The consensus estimate has shifted 17.32% due to these changes.

VGM Scores

At this time, Sallie Mae has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Sallie Mae has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.