What happened
Shares of student loan servicer Navient (NAVI 0.99%) had fallen nearly 11% as of 3 p.m. ET today after the company announced earnings results for the fourth quarter and full year of 2021 that widely missed consensus estimates.
So what
Navient reported a net loss of $0.07 per share on total revenue of $189 million. Adjusted diluted earnings per share of $0.78 missed the adjusted analyst estimate of $0.86 and revenue missed as well.
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"2021 was a year that presented some significant opportunities along with a few challenges. Our company responded to both with agility, determination, and success, positioning us well for 2022 and beyond," Jack Remondi, president and CEO of Navient, said on the Q4 earnings call.
This year, Navient is guiding for core earnings return on equity in the mid to high teens as a percentage, and an earnings before interest, taxes, depreciation, and amortization (EBITDA) margin in the high teens percentage range. The charge-off rate, which looks at debt that will likely go bad as a percentage of total loans, is expected to come in at less than 0.10% for federal student loans and between 1.5% and 2% for consumer student loans. Management is also guiding for originations of around $7 billion in 2022, assuming the current pause on student loan payments expires in May.
Now what
There are some risks in this business such as the student loan moratorium not expiring in May as expected and inflation and rising interest rates increasing charge-offs. But the company is expected to grow total originations and to generate some strong return on equity, so the earnings miss does not overly concern me.
