Navient(US:NAVI) ZACKS·2025-01-23 18:26Earnings Performance and Expectations - Navient Corporation (NAVI) is scheduled to report Q4 2024 results on Jan 29, with anticipated declines in revenues and earnings compared to the year-ago quarter [1] - NAVI's Q3 2024 EPS surpassed the Zacks Consensus Estimate by 21.7%, driven by a rise in other income and a decline in loan loss provisions, though net interest income (NII) decreased and expenses rose [2] - NAVI has a decent earnings surprise history, outpacing estimates in three of the trailing four quarters with an average surprise of 8.89% [3] - The Zacks Consensus Estimate for Q4 2024 earnings is 20 cents per share, revised downward by 16.7% in the past month, indicating a 71.4% decline from the year-ago figure [14] - The Zacks Consensus Estimate for Q4 2024 revenues is $151.1 million, suggesting a 21.7% decline from the year-ago reported number [15] Key Factors Influencing Q4 Results - Consumer loan demand was at a decent level in Q4, supported by clarity on the Fed's rate cut path and a stabilizing macroeconomic backdrop, which may have improved NII [4] - Elevated prepayment due to student loan forgiveness and weak origination volume likely limited revenue growth in the Federal Education Loans and Consumer Lending segments [5] - The consensus estimate for NII (Federal Education loan) is $40.5 million, a sequential increase of 1.2%, while NII (consumer lending) is expected to decline 2.4% to $119 million, and NII (Core) is expected to decline 2.8% to $136.2 million [6] - NAVI finalized the sale of its Government Services business in December 2024, expecting a loss of $25-$35 million in Q4 2024 results [7] - Lower gains on derivative/hedging and the sale of the healthcare unit likely negatively impacted other income, with the Zacks Consensus Estimate for other income at $7.3 million, a 27% decline from the prior quarter [8] Revenue and Expense Trends - The consensus estimate for servicing revenues is $13.50 million, a 3.8% fall from the prior quarter, while asset recovery and business processing revenues are expected to decline 40% to $41.9 million [9] - The Zacks Consensus Estimate for total non-interest income is $75.4 million, a significant decline from the prior quarter's $312 million [9] - NAVI's cost-control measures are expected to have improved operating efficiency and reduced expenses, supporting bottom-line growth in Q4 [10] 2024 Outlook - Management expects core EPS to be $2.45-$2.50 for 2024 [11] - The Federal Family Education Loan Program segment's NIM is expected to be in the mid-70s, while the Consumer Lending segment's NIM is likely to be in the low 300s [11] - The EBITDA margin is expected to be in the high teens, and adjusted tangible equity is anticipated to be above 80% [12] Peer Performance - Capital One (COF) reported Q4 2024 adjusted earnings of $3.09 per share, surpassing the Zacks Consensus Estimate of $2.66, driven by higher net interest income, non-interest income, and a rise in loans and deposits, though expenses increased [16] - Ally Financial (ALLY) reported Q4 2024 adjusted earnings of 78 cents per share, surpassing the Zacks Consensus Estimate of 59 cents, with a 95% jump from the year-ago quarter, benefiting from higher net finance revenues and lower expenses, though other revenues and net finance receivables declined [17] Earnings ESP and Zacks Rank - NAVI does not have a positive Earnings ESP (-32.6%) or a Zacks Rank 3 (Hold) or higher, reducing the odds of an earnings beat [13][14]