Navient's (NAVI) Ratings Affirmed by Moody's, Outlook Stable

Navient Corporation’s NAVI ratings have been affirmed by Moody's Investors Service. The Wilmington, DE-based lender’s senior unsecured debt rating has been reiterated as Ba3, senior unsecured debt shelf rating as (P)Ba3 and Corporate Family Rating as Ba3. Also, the outlook has remained stable.

Reasons Behind Unchanged Ratings

Moody’s stable ratings are reflective of Navient’s constant financial performance and good asset quality on the back of $105 billion student loan portfolio. Further, the rating agency is optimistic of Navient’s acquisition of Earnest, a financial technology company in November 2017. Per Moody’s, this acquisition might help Navient reduce the pace of declining net income if it focuses on development of new and existing businesses.  

This acquisition is likely to boost Navient as it marks the company’s comeback in student loan origination market. After becoming one of the servicers to U.S. Department of Education under Direct Student Loan Program in 2010, the company stopped originating new FFELP loans. Earnest's student loan refinancing and personal loan offerings will support Navient’s declining loan portfolio, particularly private student loan portfolio.

Also, Moody’s was positive on Navient’s decision to suspend share buyback program in order to reduce leverage and focus on growing its private student lending portfolio. Also, it expects to resume buyback in the second half of 2018.

Moody's affirmed the outlook on expectations that Navient would continue to execute its origination strategy, maintain solid financial performance and current leverage levels along with conservatively managing its liquidity and funding requirements.

What Can Trigger Change in Moody’s Ratings

Rating for Navient can be upgraded in case Moody’s feels that the lender has successfully build its private loan originating business and reduced declining trend of its loan portfolio.

At the same time, ratings can go down if the financial performance of Navient deteriorates or the value of the investment portfolio declines.

The company’s shares have lost 9.8% in the past year against 2.8% growth of the industry.

The stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Encore Capital Group ECPG has witnessed an upward estimate revision of 10.4% in the last 60 days. Additionally, the stock has rallied more than 44% in the past year. It carries a Zacks Rank #2 (Buy).

Enova International ENVA earnings estimates for the current year have been revised 5.2% upward over the last 60 days. Its shares have gained 55.9% in the past year. It carries a Zacks Rank of 2.

World Acceptance Corporation’s WRLD earnings estimate have remained stable for the current year, over the last 30 days. The company’s shares have soared around 106.3% in a year’s time. It also carries a Zacks Rank of 2.

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