雅虎香港財經 Navient (NAVI) Misses on Q4 Earnings, Plans Strategic Actions
Navient Corporation NAVI reported fourth-quarter 2023 adjusted earnings per share of 70 cents, missing the Zacks Consensus Estimate of 77 cents. Also, the bottom line was lower than the prior-year quarter’s 76 cents.
Results were adversely impacted by a fall in total other income and core net interest income (NII). Further, a rise in expenses acted as a headwind. Nonetheless, strategic actions announced by the company will support its financials in the upcoming period.
Navient’s GAAP net loss was $28 million. It recorded net income of $105 million in the prior-year quarter.
For 2023, core earnings per share were $2.45, comparing unfavorably with the year-ago figure of $3.19 and missing the Zacks Consensus Estimate of $3.49. Net income (GAAP) was $228 million or $1.85 per share, down from $645 million or $4.49 per share in 2022.
NII Declines, Expenses Increase
Core NII plunged 16.8% year over year to $193 million in the fourth quarter. Further, it missed the Zacks Consensus Estimate of $210.8 million.
In 2023, core NII was down 7.8% from the prior year to $946 million. Also, the top line missed the Zacks Consensus Estimate of $964.7 million.
Total other income declined 43.1% to $62 million. The downside stemmed from a decrease in all components except asset recovery and business processing revenues.
Provision for loan losses was $55 million compared with $17 million in the year-earlier quarter.
Total expenses increased 1% year over year to $204 million.
Quarterly Performance of Segments
Federal Education Loans: The segment generated a net income of $63 million, which declined 35% year over year.
As of Dec 31, 2023, the company’s net Federal Family Education Loan Program (FFELP) loans were $37.93 billion, down 4.2% sequentially.
Consumer Lending: This segment reported a net income of $46 million, which decreased from $84 million in the year-ago quarter.
The private education loan delinquency rate greater than 30 days was 5.1% compared with 5% in the prior-year quarter.
As of Dec 31, 2023, the company’s private education loans were $16.9 billion, which decreased 2.5% from the prior quarter. Navient originated $191 million of private education refinance loans in the reported quarter.
Business Processing: Segmental net income of $8 million increased from $6 million in 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 $839 million of total unrestricted cash and liquid investments as of Dec 31, 2023.
Capital Distribution Activities
In the fourth quarter, the company paid out $18 million in common stock dividends.
In the reported quarter, Navient repurchased shares of common stock for $70 million. As of Dec 31, 2023, there was $290 million of the remaining share-repurchase authority.
Strategic Initiatives Announced by the Company
To reduce its expense base, simplify operations as well as increase its financial and operating flexibility, NAVI is majorly undertaking three strategic actions. Firstly, it is outsourcing the servicing of its student loan portfolio to a third party. Pursuant to this, the company has entered into a binding letter of intent that will transition its student loan servicing to MOHELA, a leading provider of student loan servicing for government and commercial enterprises.
The outsourcing will help Navient to create a variable cost structure as well as provide attractive unit economics across a wide range of servicing volume scenarios.
Secondly, Navient’s initiatives involve exploring a range of strategic options for its business processing division, including its potential divestment. This, along with the outsourced servicing model, increases the opportunities for shared cost reduction.
Lastly, NAVI aims to reshape its shared services functions and corporate footprint to align with the needs of a more focused, flexible and streamlined company.
Such strategic initiatives are expected to begin in 2024. Management projects to mostly complete the above mentioned actions over the next 18 to 24 months.
Our Take
Navient’s has been an eminent portfolio holder of private education loans. Moreover, its diversified business segments are likely to support revenue growth. Further, the strategic actions undertaken by the company will support financials in the upcoming period.
Fourth-quarter results reflected lower fee income and a rise in provisions, which 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 sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Performance of Other Consumer Loan Providers
Ally Financial’s ALLY fourth-quarter and full-year 2023 adjusted earnings of 45 cents per share surpassed the Zacks Consensus Estimate by a penny. However, the bottom line reflects a decline of 58.3% from the year-ago quarter.
ALLY’s results were primarily aided by an improvement in other revenues. However, a decline in net financing revenues, and higher expenses and provisions were the undermining factors.
Sallie Mae’s SLM, formally SLM Corporation, fourth-quarter 2023 core earnings per share of 72 cents missed the Zacks Consensus Estimate of 87 cents. In the prior-year quarter, it incurred a loss of 33 cents.
A rise in non-interest expenses impeded the results of SLM. Nonetheless, lower provisions for credit losses, an increase in the NII, robust loan originations and higher non-interest income were positives.
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