Consumer Loan Stocks' Q2 Earnings Preview: NAVI, DFS

With the second-quarter 2016 earnings season in full swing, investors are keeping a close eye on the performance of the companies. The stressed first quarter that was plagued by several issues including slowdown of the Chinese economy, continued volatility in commodity prices, global growth uncertainties and low rates, largely affected the performance of the finance sector. However, the scenario in the second quarter seems to depict a better environment to some extent with positives including a rebound in oil prices and continued recovery of the U.S. economy.

Underlying loan demand remained stable during the second quarter, with overall growth in loans including commercial and industrial and commercial real estate loans. Also, demand for several consumer categories including card, auto as well as student loans remained strong.

Per our latest Earnings Preview article, overall earnings for the Finance sector in second-quarter 2016 are expected to be down 3.3% year over year. Also, revenues are expected to be down 0.5%. Notably, during the first quarter the sector witnessed a 6.9% decline in earnings while revenues improved 3.3%.

With most of the companies are set to release results, let’s have a look at what’s in store for the following firms, releasing results on Jul 19.

Navient Corporation (NASDAQ:NAVI) : Quarterly results of Navient, which services over $300 billion in student loans for more than 12 million customers, should benefit from continued new acquisitions of student loan portfolios, both Federally Guaranteed Student Loans (FFELP) as well as Private Education Loan. Also, the company’s efforts to grow asset recovery revenues including leveraging its acquisitions – Xtend Healthcare, and Gila LLC – should boost the top line to some extent.

Also, expenses are likely to remain stable as several costs related to composition and compensation pay expenses that were incurred in the first quarter are not likely to recur in the second quarter.

However, Navient’s activities during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained stable at 45 cents per share over the last seven days. (Read more: Navient to Report Q2 Earnings: What to Expect? )

NAVIENT CORP Price and EPS Surprise

NAVIENT CORP Price and EPS Surprise | NAVIENT CORP Quote

Discover Financial Services (NYSE:DFS) : The Riverwoods, IL-based company’s card sales volume has been witnessing consistent progression owing to improved consumer spending and wallet share, credit quality trends and new card account over the last several quarters.

Also, the company’s growing student loan portfolio strengthens its line of banking products. While continued loan growth momentum is likely to aid in improving net interest income for the second quarter, provisions should increase as well.

The Zacks Consensus Estimate for the quarter declined 1.4% to $1.42 per share over the last seven days. (Read more: Discover Financial Q2 Earnings: A Surprise in Store?)

DISCOVER FIN SV Price and EPS Surprise

DISCOVER FIN SV Price and EPS Surprise | DISCOVER FIN SV Quote

Stay tuned! Check back on our full write-up on earnings releases of these stocks.