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Navient (NAVI) Up 10.5% 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 10.5% 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 catalysts.

Navient Q3 Earnings Beat Estimates, Expenses Decline

Navient pulled off a positive earnings surprise of 10.7% in third-quarter 2019. Core earnings per share of 62 cents surpassed the Zacks Consensus Estimate of 56 cents. Also, the bottom line came in higher than the year-ago quarter figure of 53 cents.

Core earnings excluded the impact of certain other one-time items, including restructuring and regulatory-related expenses.

Third-quarter results of Navient benefited from a fall in expenses and provisions. Further, loans climbed up. However, lower net interest income was a key headwind. Moreover, year-over-year decline in deposits was a drag.

GAAP net income for the quarter was $145 million or 63 cents per share compared with $114 million or 43 cents per share in the year-ago quarter.

NII and Fee Income Fall, Expenses Decline (on core earnings basis)

Net interest income (NII) dipped 5.5% year over year to $309 million.

Non-interest income declined 2% to $192 million. Rise in asset recovery and business processing revenues was more than offset by lower servicing revenues and other income.

Provision for loan losses plunged nearly 24.7% to $64 million.

Total expenses declined 1.2% to $242 million from the year-ago quarter.

Segment Performance

Federal Education Loans: The segment generated core earnings of $128 million, down 10.5% year over year. Lower revenues, partly muted by decline in expenses, posed as a headwind.

During the reported quarter, Navient acquired FFELP loans of $39 million. As of Sep 30, 2019, the company’s FFELP loans were $66.1 billion, down 2.8% sequentially.

Consumer Lending: The segment reported core earnings of $79 million, up 9.7% year over year. Lower provisions and higher revenues were the positives. Net interest margin was 3.45%, up 10 basis points.

Private education loan delinquencies of 30 days or more of $1 billion were down $363 million from the prior-year quarter.

As of Sep 30, 2019, the company’s private education loans totaled $21.8 billion, up 1.3% from prior quarter.

Business Processing: The segment reported core earnings of $9 million compared with $4 million in the year-ago quarter. Higher revenues and lower expenses 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, issuance of additional unsecured debt, repayment of principal on unencumbered student-loan assets and distributions from securitization trusts (including servicing fees). It might also issue term asset-backed securities (ABS).

During the reported quarter, Navient issued $1.3 billion in term ABS.


In 2019, management plans to achieve net interest margin in federal education loan segment to be low to mid 80’s basis points. Also, charge-off rate in the segment is expected at 0.08-0.10%.

Net interest margin in consumer lending segment is expected at 3.10-3.20%. Also, charge-off rate in the segment is expected at 1.6-1.8%.

Core EPS is expected to be in the range of $2.43-$2.48, excluding expenses associated with regulatory costs and restructuring expenses.

In Business Processing segment EBITDA margins in the high teens is expected.

Core earnings return on equity is expected to be in mid-teens. Core earnings efficiency ratio is likely to be around 50%. Tangible net ration is anticipated between 1.23x and 1.25x.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

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 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.


Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Navient has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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