Navient's (NAVI) Q2 Earnings to be Hit by Decline in NII
Navient Corporation NAVI is scheduled to report second-quarter 2023 results on Jul 26, before market open. The company’s earnings and revenues are expected to have witnessed year-over-year declines.
This Wilmington, DE-based lender’s first-quarter 2023 earnings surpassed the Zacks Consensus Estimate primarily due to a fall in expenses. However, fall in core net interest income (NII) and total other income hindered the results.
NAVI has a mixed earnings surprise history. Navient’s earnings outpaced estimates in two of the trailing four quarters and missed twice, the average beat being 6.75%.
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 76 cents per share has moved 1.3% downward in the past week. Further, the figure indicates a 17.4% decline from the year-ago quarter’s reported figure.
The consensus estimate for revenues of $223.8 million indicates a decline of 17.4% from the year-ago reported figure.
Key Factors to Note
Per Fed’s latest data, demand for consumer loans improved in April and May. This is likely to have supported Navient’s NII to some extent.
Federal Reserve hiked rates by 25 basis points in the to-be-reported quarter. With this, the policy rate was at a 15-year high of 5-5.25% as of second-quarter 2023 end. Such high interest rates are likely to have increased funding costs in the quarter under review. Successive rate hikes are likely to have limited any further positive impact on the company’s NII.
Hence, NAVI’s NII and net interest margins are expected to have been adversely impacted during second-quarter 2023. As a result, revenues in the Federal Education Loans and Consumer Lending segments are likely to have been affected.
The consensus estimate for NII is pegged at $223 million, suggesting a sequential decline of 4.7%.
Nonetheless, the Zacks Consensus Estimate for asset recovery and business processing revenues of $80 million indicates a 11.1% rise from the prior quarter’s reported figure. This is likely to have aided the Business Processing segment’s growth.
The consensus estimate for servicing revenues is pegged at $17 million, remaining flat from the prior quarter’s reported figure.
Overall, the Zacks Consensus Estimate for total fee income of $103 million indicates a rise of 17% from the prior-quarter’s reported figure.
Lastly, Navient’s initiatives to become a technologically-advanced company and its aim to expand services outside the education industry are expected to have led to elevated expenses during the quarter, affecting bottom-line growth.
What Our Quantitative Model Predicts
Our proven model does not 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’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP for Navient is -0.11%.
Zacks Rank: Navient currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
First Citizens BancShares, Inc. FCNCA and The Bancorp, Inc. TBBK are a couple of stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.
The Earnings ESP for FCNCA is +3.21% and the stock currently carries a Zacks Rank #3. It is slated to report second-quarter 2023 results on Aug 3.
The Zacks Consensus Estimate for FCNCA’s second-quarter earnings has moved 4.3% south over the past 30 days.
TBBK currently has an Earnings ESP of +1.16% and a Zacks Rank #2. It is scheduled to release second-quarter 2023 results on Jul 27.You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TBBK’s second-quarter earnings has moved 1.1% south over the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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The Bancorp, Inc. (TBBK) : Free Stock Analysis Report
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Navient Corporation (NAVI) : Free Stock Analysis Report
