Sallie Mae SLM is scheduled to report its first-quarter 2015 results on Wednesday, Apr 22, 2015, after the market close.
Sallie Mae’s fourth-quarter 2014 earnings missed the Zacks Consensus Estimate. Results were affected by higher expenses and provisions, partially offset by increased net interest income. However, a decent capital position, increased loan originations and increased balance in the private education loan portfolio were the positives.
Will Sallie Mae miss on earnings this quarter? Let’s see how things have shaped up.
What to Expect in Q1
In 2014, Sallie Mae originated $4.1 billion in private education loans, exceeding its guidance of $4 billion. As the education loans market remains healthy and growing, we believe the company is likely to witness increased private education loan originations in the first quarter, which consequently should support Sallie Mae’s interest income. Net interest margin is likely to remain stable at the current level.
Sallie Mae derives a major part of its non interest income from loan sales. However, as the company does not expect any loan sales in the first quarter, we believe non interest income will trend downwards.
Regarding expenses, the quarter may reflect additional expenses in the company’s servicing and collection operations, along with its investments on the technology front. Also, it may include minimal restructuring expenses.
Activities of Sallie Mae during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained unchanged at 7 cents per share over the last seven days.
Earnings Whispers
Our proven model does not conclusively show that Sallie Mae is likely to beat the Zacks Consensus Estimate in the upcoming release. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The Earnings ESP for Sallie Mae is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 7 cents per share.
Zacks Rank: Sallie Mae’s Zacks Rank #2 (Buy) increases the predictive power of ESP. However, we need to have a positive Earnings ESP to be sure of an earnings beat.
Stocks That Warrant a Look
Here are some stocks you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat this quarter:
BankUnited, Inc. BKU has an Earnings ESP of +2.27% and carries a Zacks Rank #3. The company is scheduled to release results on Apr 23.
FCB Financial Holdings, Inc. FCB has an earnings ESP of +2.70% and holds a Zacks Rank #1. It is scheduled to report results on Apr 23.
The earnings ESP for Popular, Inc. BPOP is +9.86% and it carries a Zacks Rank #1. The company is scheduled to release results on Apr 27.
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