Decline in Non-Interest Income to Hurt Navient in Q4 Earnings

Navient Corporation NAVI is scheduled to report fourth-quarter 2024 results on Jan. 29, before market open. NAVI’s quarterly revenues and earnings are anticipated to have declined from the year-ago quarter’s reported levels.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.This Wilmington, DE-based lender’s third-quarter 2024 earnings per share (EPS) surpassed the Zacks Consensus Estimate by 21.7%. Results were driven by a rise in other income. A decline in provision for loan losses was another positive. However, a decrease in net interest income (NII) and a rise in expenses 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 8.89%.Navient Corporation Price and EPS Surprise  Navient Corporation price-eps-surprise | Navient Corporation QuoteKey Factors to Influence Navient’s Results in Q4Per the Fed’s latest data, consumer loan demand was at a decent level in the fourth quarter. The clarity on the Fed’s rate cut path and the stabilizing macroeconomic backdrop will likely lead the lending scenario to improve. This is expected to have supported the company’s NII in the quarter-to-be reported to some extent.However, elevated prepayment due to student loan forgiveness and weak origination volume are anticipated to have limited the company’s revenue growth in the Federal Education Loans and Consumer Lending segments.The consensus estimate for NII (Federal Education loan) is pegged at $40.5 million, suggesting a sequential increase of 1.2%. The Zacks Consensus Estimate for NII (consumer lending) is pegged at $119 million, implying a sequential decline of 2.4%. The Zacks Consensus Estimate for NII (Core) is pegged at $136.2 million, indicating a sequential decline of 2.8%.In December 2024, Navient finalized an agreement to sell its Government Services business to an affiliate of Gallant Capital Partners, LLC, which is expected to close in the first quarter of 2025, subject to certain conditions. The company expects to recognize a loss related to this transaction of $25-$35 million in its fourth-quarter 2024 results.Thus, lower gains on derivative/hedging, coupled with the recent sale of the healthcare unit, are likely to have negatively impacted other income in the fourth quarter. The Zacks Consensus Estimate for other income of $7.3 million indicates a 27% decline from the prior quarter’s reported figure.The consensus estimate for servicing revenues is pegged at $13.50 million, indicating a 3.8% fall from the prior quarter’s reported figure. The Zacks Consensus Estimate for asset recovery and business processing revenues of $41.9 million implies a 40% fall from the prior quarter’s reported figure. The Zacks Consensus Estimate for total non-interest income of $75.4 million indicated a significant decline from the prior quarter’s reported figure of $312 million.Navient's cost-control measures are expected to have improved operating efficiency and reduced expenses, which are likely to have offered some support to bottom-line growth in the fourth quarter.NAVI’s 2024 OutlookManagement expects core EPS to be $2.45-$2.50.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.The EBITDA margin is expected to be in the high teens.The adjusted tangible equity is anticipated to be above 80%.What the Zacks Model Reveals for NavientNAVI 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 -32.6%.Zacks Rank: The company currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.NAVI’s activities in the to-be-reported quarter were inadequate to gain analysts’ confidence. As a result, the Zacks Consensus Estimate for fourth-quarter earnings of 20 cents per share has been revised downward by 16.7% in the past month. Also, the figure indicates a 71.4% decline from the year-ago reported figure.The Zacks Consensus Estimate for revenues of $151.1 million suggests a decline of 21.7% from the year-ago reported number.Performance of NAVI’s PeersCapital One’s COF fourth-quarter 2024 adjusted earnings of $3.09 per share handily surpassed the Zacks Consensus Estimate of $2.66. The bottom line also compared favorably with $2.24 in the prior-year quarter.COF’s results gained from higher net interest income and non-interest income and rise in loans and deposits. Also, provisions declined during the quarter. However, the increase in expenses was the undermining factor.Ally Financial’s ALLY fourth-quarter 2024 adjusted earnings of 78 cents per share handily surpassed the Zacks Consensus Estimate of 59 cents. Also, the bottom line reflected a jump of 95% from the year-ago quarter.Results benefited from a rise in net finance revenues. Further, lower expenses and a decline in credit costs provided support. However, lower other revenues a decline in net finance receivables and loans and deposits were the undermining factors.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Capital One Financial Corporation (COF): Free Stock Analysis Report Ally Financial Inc. (ALLY): Free Stock Analysis Report Navient Corporation (NAVI): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks