Navient Corporation NAVI is scheduled to report first-quarter 2023 results on Apr 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 fourth-quarter 2022 earnings missed the Zacks Consensus Estimate primarily due to a fall in net interest income (NII) and total other income. Also, higher provisions hindered the results. Nonetheless, a decrease in expenses was a tailwind.
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 6.24%.
Navient Corporation Price and EPS Surprise
NAVI’s activities in the to-be-reported quarter were adequate to gain analysts’ confidence. As a result, the Zacks Consensus Estimate for first-quarter earnings of 88 cents per share has moved marginally upward in the past week. However, the figure indicates a 2.22% decline from the year-ago quarter’s reported figure.
The consensus estimate for revenues of $230.68 million indicates a decline of 16.42% from the year-ago reported figure.
Key Factors to Note
Per the Fed’s latest data, consumer loan declined in the quarter under review. Federal Reserve hiked rates by 50 basis points in the to-be-reported quarter and 25 bps in the prior quarter. With this, the policy rate reached 4.75-5% in March 2023, the highest since 2008. Such successive rate hikes are likely to have limited any further positive impact on Navient’s NII.
Hence, a weakening lending scenario and lower-to-no positive impact of higher rates are anticipated to have affected NII in the quarter.
Nonetheless, the consensus estimate for NII is pegged at $275 million, suggesting a sequential increase of 23.3%.
The increasing interest rate environment is anticipated to have affected its net interest margin in the Federal Education Loans and Consumer Lending segments.
Weakness in fee income is expected to have kept Navient’s top line under pressure in the to-be-reported quarter. Fee income declined sequentially in the fourth quarter due to a decrease in transition services performed in connection with the Department of Education servicing contract being transferred. A similar trend is expected to have continued in the quarter under review.
The pandemic-related contract expirations are expected to have continued to affect revenues in the Business Processing segment.
Nonetheless, the consensus estimate for servicing revenues is pegged at $17.33 million, suggesting a 2% increase from the prior quarter’s reported figure. The consensus mark for asset recovery and business processing revenues suggests a sequential rise of 2.8% to $74 million.
With this, the Zacks Consensus Estimate of 98 million for total fee income indicates a decline of 10.1% from the prior-quarter’s reported figure.
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, affecting bottom-line growth.
What Our Quantitative Model Predicts:
Our proven model conclusively predicts 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 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 +2.36%.
Zacks Rank: Navient currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks That Warrant a Look
Here are a few finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around.
Independent Bank IBCP has an Earnings ESP of +1.40% and carries a Zacks Rank #3 at present. The company is slated to report first-quarter 2023 results on Apr 27.
Over the past month, the Zacks Consensus Estimate for IBCP’s quarterly earnings has been unrevised.
QCR Holdings QCRH has an Earnings ESP of +4.62% and carries a Zacks Rank #3, currently. The company is slated to report first-quarter 2023 results on Apr 26.
Over the past month, the Zacks Consensus Estimate for QCRH’s quarterly earnings has been revised marginally downward.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.