Navient Likely to be Hurt by a Decline in Fee Income in Q3 Earnings

Navient Corporation NAVI is scheduled to report third-quarter 2024 results on Oct. 30, before market open. NAVI’s quarterly revenues and earnings are anticipated to have declined from the year-ago quarter’s reported level.

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This Wilmington, DE-based lender’s second-quarter 2024 earnings of 53 cents surpassed the Zacks Consensus Estimate of 42 cents. Results were driven by a decline in total expenses. A solid liquidity position was another positive. A decrease in net interest income (NII) and other income were headwinds.

NAVI has a decent earnings surprise history. Navient’s earnings outpaced estimates in three of the trailing four quarters and missed once, with an average earnings surprise of 4.38%.

Key Factors to Influence Navient’s Result in Q3

Per the Fed’s latest data, consumer loan demand remained steady in the third quarter. The lending environment witnessed a slight improvement after the central bank cut interest rates by 50 basis points to a range of 4.75-5% on Sept. 18, marking the first reduction since March 2020.

While this development might prove to be helpful in the long term, it is not expected to have a positive impact on NAVI’s NII during the third quarter. Also, relatively higher rates might have hurt NII growth prospects due to the elevated funding costs. As a result, revenues in the Federal Education Loans and Consumer Lending segments are likely to have declined.

The consensus estimate for NII (Federal Education loan) is pegged at $49.3 million, suggesting a sequential decline of 7%. The Zacks Consensus Estimate for NII (consumer lending) is pegged at $122 million, suggesting a sequential decline of 3.2%.

The Zacks Consensus Estimate for NII (Core) is pegged at $142.3 million, indicating a sequential rise of 4.6%. The Zacks Consensus Estimate for other income of $5.1 million indicates a 27.5% increase from the prior quarter’s reported figure.

The consensus estimate for servicing revenues is pegged at $16.23 million, indicating a 9.8% fall from the prior quarter’s reported figure. The Zacks Consensus Estimate for asset recovery and business processing revenues of $80.2 million indicates a 1% fall from the prior quarter’s reported figure. 

The Zacks Consensus Estimate for total non-interest income of $102.6 million declined marginally from the prior quarter’s reported figure.

Navient's cost-control measures are expected to have improved operating efficiency and reduced expenses, which might have offered some support to the bottom-line growth in the third quarter.

What the Zacks Model Reveals for Navient

Navient does not have the right combination of the two key ingredients — a positive Earnings ESP  and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat. 

You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Navient is -6.85%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

NAVI’s activities in the to-be-reported quarter were inadequate to gain analysts’ confidence. As a result, the Zacks Consensus Estimate for third-quarter earnings of 23 cents per share has been revised downward by 14.8% in the past month. Also, the figure indicates a 72.62% decline from the year-ago reported figure.

The Zacks Consensus Estimate for revenues of $150 million indicates a decline of 46.42% from the year-ago reported number.

Bank Stocks Worth a Look

Some better-ranked stocks from the broader banking space are 1st Source Corporation SRCE and UMB Financial Corporation UMBF, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for SRCE’s 2024 earnings has moved marginally upward over the past 30 days. In the past six months, shares of SRCE have risen 20.6%.

The Zacks Consensus Estimate for UMBF’s 2024 earnings has remained unchanged over the past 30 days. Its shares have risen 27.3% in the past six months.

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