Navient (NAVI) Up 7.2% Since Last Earnings Report: Can It Continue?November 25, 2021
It has been about a month since the last earnings report for Navient (NAVI). 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.
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…