Navient (NAVI) Q3 Earnings Miss on High Provisions & Expenses
Navient Corporation NAVI reported third-quarter 2023 adjusted earnings per share of 47 cents, missing the Zacks Consensus Estimate of 81 cents. Also, the bottom line was lower than the prior-year quarter’s 62 cents.
Results were adversely affected by a fall in total other income and elevated expenses. However, a rise in core net interest income (NII) acted as a tailwind.
Navient’s GAAP net income was $79 million, down from $105 million in the prior-year quarter.
NII & Expenses Increase
Core NII increased 13.4% year over year to $280 million in the third quarter. Further, it surpassed the Zacks Consensus Estimate of $210.9 million.
Total other income declined 12.7% to $131 million. The downside stemmed from a decrease in all components except asset recovery and business processing revenue.
Provision for loan losses was $72 million compared with $28 million in the year-earlier quarter.
Total expenses increased 6.7% year over year to $240 million.
Quarterly Performance of Segments
Federal Education Loans: The segment generated a net income of $94 million, which remained unchanged year over year.
As of Sep 30, 2023, the company’s net Federal Family Education Loan Program (FFELP) loans were $39.58 billion, down 3.1% sequentially.
Consumer Lending: This segment reported a net income of $56 million, which decreased from $65 million in the year-ago quarter.
The private education loan delinquency rate greater than 30 days was 4.7% compared with 4.4% in the prior-year quarter.
As of Sep 30, 2023, the company’s private education loans were $17.33 billion, which decreased 2.3% from the prior quarter. Navient originated $178 million of private education refinance loans in the reported quarter.
Business Processing: Segmental net income of $9 million remained unchanged from the year-ago quarter.
Liquidity
To meet liquidity needs, Navient expects to utilize various sources, including cash and investment portfolio, predictable operating cash flows provided by operating activities, 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 $977 million of total unrestricted cash and liquid investments as of Sep 30, 2023.
Capital Distribution Activities
In the third quarter, the company paid out $19 million in common stock dividends. In the reported quarter, Navient repurchased shares of common stock for $75 million. As of Sep 30, 2023, there was $360 million of the remaining share-repurchase authority.
Our Take
Navient’s diversified business segments are likely to support revenue growth. It has been an eminent portfolio holder of private education loans. In the third quarter, the company recorded a rise in NII. However, lower fee income and a rise in provisions were concerning. Further, any rise in expenses is expected to increase bottom-line pressure in the near term.
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
Invesco’s IVZ third-quarter 2023 adjusted earnings of 35 cents per share lagged the Zacks Consensus Estimate of 36 cents. The bottom line, however, rose 2.9% from the prior-year quarter.
Results of IVZ were hurt by a rise in operating expenses and lower revenues. Nevertheless, an increase in assets under management balance on decent inflows aided the results to some extent.
Northern Trust Corporation’s NTRS third-quarter 2023 earnings per share of $1.49 missed the Zacks Consensus Estimate of $1.50. However, the bottom line declined 17% year over year.
Results have been affected by a fall in NII. A deterioration in the credit quality was another headwind in the third quarter. However, a rising fee income was a positive for NTRS.
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