Navient's (NAVI) Q2 Earnings to be Hurt by a Decline in NII

Navient Corporation NAVI is scheduled to report second-quarter 2024 results on Jul 24, before market open. NAVI’s quarterly revenues and earnings are anticipated to have declined from the year-ago quarter’s reported level.

This Wilmington, DE-based lender’s first-quarter 2024 earnings surpassed the Zacks Consensus Estimate. Results were driven by a rise in total other income and a fall in expenses. However, a decline in net interest income (NII) dented quarterly results.

NAVI has a disappointing earnings surprise history. Navient’s earnings outpaced estimates in two of the trailing four quarters and missed twice, the negative surprise being 1.17%, on average.

Navient Corporation Price and EPS Surprise

 

Navient Corporation Price and EPS Surprise

Navient Corporation price-eps-surprise | Navient Corporation Quote

 

NAVI’s activities in the to-be-reported quarter were inadequate to gain analysts’ confidence. As a result, the Zacks Consensus Estimate for second-quarter earnings of 41 cents per share has been revised marginally downward in the past month. However, the figure indicates a 41.4% decline from the year-ago reported figure.

The consensus estimate for revenues of $157.3 million indicates a decline of 28.8% from the year-ago reported number.

Key Factors to Note

Per the Federal Reserve’s latest data, demand for consumer loans weakened in the second quarter of 2024. Also, the Fed kept the interest rates at a 23-year high of 5.25-5.5% during the quarter, which deteriorated the funding spread. This is expected to have limited NII growth and margins. As a result, revenues in the Federal Education Loans and Consumer Lending segments are likely to have declined.

The consensus estimate for NII (consumer lending) is pegged at $123.2 million, suggesting a sequential decline of 8.1%.

Recently, student loan forgiveness transfers were processed through MOHELA, in which $55 billion was processed in forgiveness for around 737000 borrowers between Apr 30 to Jul 1. Thus, the Federal Family Education Loan Program's (FFELP) net interest margin (NIM) is expected to have weakened due to more pre-payment pressure linked to forgiveness programs.

The consensus estimate for NII (Federal Education loan) is pegged at $49.3 million, suggesting a sequential decline of 7%.

The consensus estimate for NII is pegged at $158.9 million, suggesting a sequential decline of 2.5%.

The consensus estimate for servicing revenues is pegged at $16.3 million, indicating a 3.9% fall from the prior quarter’s reported figure. The Zacks Consensus Estimate for other income of $5.75 million indicates a 36% plunge from the prior quarter’s reported figure.

The Zacks Consensus Estimate for asset recovery and business processing revenues of $83.9 million indicates an 8.9% rise from the prior quarter’s reported figure. This is likely to have aided the Business Processing segment’s growth.

The Zacks Consensus Estimate for total non-interest income of $109.6 million indicates a rise of 6.4% from the prior quarter’s reported figure.

Nonetheless, Navient’s cost-control initiatives to improve operating efficiency are likely to have reduced its expense base, thereby offering some support to the bottom-line growth.

What Our Quantitative Model Predicts

Our proven model does not conclusively predict an earnings beat for Navient this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP for Navient is -2.85%.

Zacks Rank: NAVI currently carries a Zacks Rank of 4 (Sell).

Finance Stocks Worth a Look

A couple of finance stocks that have the right combination of elements to post an earnings beat in the upcoming releases per our model are Capital One

Financial Corporation COF and Moody's Corporation MCO.

The Earnings ESP for COF is +1.52% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2024 results on Jul 23.

MCO is scheduled to release second-quarter 2024 earnings on Jul 23. The company, which carries a Zacks Rank #2 at present, has an Earnings ESP of +1.07. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Buy 5 Stocks BEFORE Election Day

Biden or Trump? Zacks is releasing a FREE Special Report, Profit from the 2024 Presidential Election (no matter who wins).

Since 1950, presidential election years have been strong for the market. This report names 5 timely stocks to ride the wave of electoral excitement.

They include a medical manufacturer that gained +11,000% in the last 15 years… a rental company absolutely crushing its sector… an energy powerhouse planning to grow its already large dividend by 25%... an aerospace and defense standout that just landed a potentially $80 billion contract… and a giant chipmaker building huge plants in the U.S. 

Don’t Wait. Download FREE >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Moody's Corporation (MCO) : Free Stock Analysis Report

Capital One Financial Corporation (COF) : Free Stock Analysis Report

Navient Corporation (NAVI) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Data is currently not available

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.