Navient Corporation NAVI has reported third-quarter 2024 adjusted earnings per share (excluding gain from the sale of Xtend Healthcare, provision for loan losses related to lowering the expected recovery rate on defaulted Private Education Loans and restructuring and regulatory-related expenses) of 28 cents, surpassing the Zacks Consensus Estimate of 23 cents. It reported 47 cents in the prior-year quarter.
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Results were driven by a rise in other income. A decline in provision for loan losses was another positive. However, a decrease in net interest income (NII) and a rise in expenses were headwinds.
Navient’s GAAP net loss was $2 million against a net income of $79 million recorded in the prior-year quarter.
Navient’s NII Declines, Expenses Rise
NII declined significantly year over year to $140 million in the third quarter from $280 million. It missed the Zacks Consensus Estimate of $150.04 million.
Total other income increased significantly year over year to $276 million from $131 million. The rise stemmed from a gain on the sale of a subsidiary.
Provision for loan losses was $42 million, down 41.7% from the prior-year quarter.
Total expenses increased 42.5% year over year to $342 million.
NAVI’s Quarterly Performance of Segments
Federal Education Loans: The segment generated a net income of $27 million, which declined 71.3% year over year.
As of Sept. 30, 2024, the company’s net FFELP loans were $31.5 billion, down 4.3% sequentially.
Consumer Lending: This segment reported a net income of $27 million, which decreased 51.8% from the year-ago quarter.
The private education loan delinquency rate greater than 30 days was 5.3% compared with 4.7% in the prior-year quarter.
As of Sept. 30, 2024, the company’s private education loans were $16 billion, which decreased 1.4% from the prior quarter. Navient originated $262 million of private education refinance loans in the reported quarter.
Business Processing: Segmental net income of $178 million increased substantially from $9 million in the year-ago quarter.
Navient’s Liquidity
To meet liquidity needs, Navient expects to utilize various sources, including cash and investment portfolio, predictable operating cash flows provided by operating activities, the repayment of principal on unencumbered education loan assets, and distributions from securitization trusts. It may also draw down on the secured FFELP Loan and Private Education Loan facilities, issue term asset-backed securities (ABS), enter additional Private Education Loan and ABS repurchase facilities, or issue additional unsecured debt.
Notably, it had $1.14 billion of total unrestricted cash and liquid investments as of Sept. 30, 2024.
Navient’s Capital Distribution Activities
In the third quarter, the company paid out $17 million in common stock dividends.
In the reported quarter, Navient repurchased shares of common stock for $33 million. As of Sept. 30, 2024, there was $176 million of the remaining share-repurchase authority.
Our Take on NAVI
NAVI has been an eminent portfolio holder of private education loans. Its diversified business segments are likely to support revenue growth. The strategic actions undertaken to control costs are expected to support financials in the upcoming period. The company’s third-quarter results reflect a decline in NII and a rise in expenses, which were concerning. However, a surge in other income offered support.
Navient Corporation Price, Consensus and EPS Surprise
Navient Corporation price-consensus-eps-surprise-chart | Navient Corporation Quote
Currently, Navient carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performances of Other Finance Stocks
Ally Financial’s ALLY third-quarter 2024 adjusted earnings of 95 cents per share surpassed the Zacks Consensus Estimate of 81 cents. Also, the bottom line reflected a rise of 14.5% from the year-ago quarter.
In the reported quarter, ALLY witnessed an increase in revenues and lower expenses. Also, capital ratios increased, which was a positive. However, a decline in net finance receivables and loans and deposits were the undermining factors. Also, an increase in provisions hurt results to some extent.
Capital One’s COF third-quarter 2023 earnings of $4.45 per share surpassed the Zacks Consensus Estimate of $3.27 by a considerable margin. Also, the bottom line grew 6% from the year-ago quarter.
COF’s results benefited from an increase in NII, higher loan balance and lower expenses. Further, higher fee income on the back of robust credit card performance offered support. However, net interest margin declined year over year due to the rise in deposit costs. Also, higher provisions were the undermining factor.
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