Shares of Nelnet Inc. declined Thursday after a Credit Suisse analyst raised his earnings projections for the student lender but said it will be difficult to maintain that level of profit after next year.
Analyst Moshe Orenbuch lifted his forecast for Nelnet's 2008 earnings to $1.35 per share, up from a previous projection of $1.25, and boosted his outlook for 2009 to $1.30 per share from $1.20.
At the same time, the analyst maintained his target price for Lincoln, Neb.-based Nelnet at $11 and retained his "Neutral" rating.
Without improvements in the squeezed credit markets, "it will be difficult to maintain the earnings level after 2009," he wrote in a research note.
The student loan market came under stress in February as the $330 billion market for auction-rate securities collapsed _ causing more than 80 student lenders, including some state agencies, to stop making federally guaranteed student loans either temporarily or permanently.
Lenders, Wall Street investors and college administrators pushed for government help. In May, the Bush administration agreed to have the government buy up their student loans to ensure the companies have access to capital.
Student loan legislation that took effect last October halved the interest rates on federally-backed student loans, but paid for that by cutting $20 billion in federal subsidies to student lenders.
For Nelnet, the results from its fee-based businesses "are unlikely to replace the lost earnings from the legislative changes and funding disruption," Orenbuch wrote.
Nelnet reported last month that its second-quarter profit nearly tripled as it restructured operations amid the tight credit markets. The company earned $43.7 million, or 89 cents per share, in the April-June quarter, up from $14.8 million, or 30 cents per share, in the same period last year.
Shares of Nelnet declined 25 cents to $15.75 in afternoon trading. The stock has traded between $8.63 and $19.71 over the past 52 weeks.
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