Compass Point Raises Price Target on Navient (NAVI) Following 1Q Earnings Call

Compass Point reiterated a Neutral rating on Navient Corporation (NASDAQ: NAVI), and raised the price target to $13.00 (from $11.00), following the company's 1Q earnings call. Management continues to expect the final outcome from Moody's and Fitch reviews to be more favorable than initial guidance/commentary. Also, given the resumption of FFELP ABS activity, management expects there to be renewed interest from legacy holders to sell their portfolios.

Analyst Michael Tarkan commented, "We are maintaining our Neutral rating on NAVI and are increasing our price target to $13.00, from $11.00, after the company's 1Q16 earnings call. There is no change to our 2016 core EPS estimate of $1.86 and we are establishing a 2017 estimate of $1.95 (with share repurchase supporting declining core earnings). We view 1Q results as steady as credit improvement and ongoing capital activity were offset by higher operating expenses and slightly lower NIM (see here for our first look). The company continues to prudently manage its unsecured debt, take action to ease pressure from FFELP ABS trust uncertainty, and return capital to shareholders. However, we continue to see limited opportunities for growth, still lack visibility into a potential CFPB enforcement action and the aftermath of potential FFELP trust downgrades, and servicing margins may compress further. We also expect share repurchase activity, which has helped support EPS, to slow in 2017 and beyond as debt maturities become a greater focus for capital. As such, we remain Neutral-rated. We could become more constructive on the stock at a lower valuation and/or upon resolution of the CFPB investigation."

For an analyst ratings summary and ratings history on Navient Corporation click here. For more ratings news on Navient Corporation click here.

Shares of Navient Corporation closed at $12.95 yesterday.

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