SLM Q3 Earnings: Can NasdaqGS:SLM Hit Its $0.10 EPS Target?

in EARNINGS/INVESTING IDEAS by

SLM Corporation (NasdaqGS:SLM) is scheduled to report Q3 earnings results after markets close for trading on October 21, 2020.

The company is expected to report earnings of $0.10/share on revenue of $366.5 million. The consensus earnings per share (EPS) of $0.10/share is based on a poll of 10 analysts and represents a decline in eps of −66.2% over the same quarter last year, when the company reported earnings of $0.29/share.

The revenue forecast of $366.5 million based on a poll of 6 analysts implies a year-over-year (YoY) decline in revenue of −9.5%. Last year the company reported $405.1 million in revenue for the quarter.

Expected to report EPS contraction of −66.2% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $366.45 $405.06 −9.5%
EPS $0.10 $0.29 −66.2%

Earnings Call Trends

Historically, management has exceeded analyst expectations 6 out of the last 8 tracked quarters, and missed expectations 2 quarters.

What are your expectations from SLM Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.11 -$0.22 −293.7% Missed
Q1, 2020 $0.75 $0.79 5.0% Beat
Q4, 2019 $0.33 $0.33 0.6% Beat
Q3, 2019 $0.27 $0.29 7.7% Beat
Q2, 2019 $0.30 $0.31 4.0% Beat
Q1, 2019 $0.30 $0.34 12.9% Beat
Q4, 2018 $0.27 $0.31 15.6% Beat
Q3, 2018 $0.24 $0.23 −2.6% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −1.8%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 22, 2020 $7.03 $6.90 −1.8% Decline
April 22, 2020 $6.76 $7.18 6.2% Increase
January 22, 2020 $8.82 $11.75 33.2% Increase
October 23, 2019 $9.05 $8.36 −7.6% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −1.01, the model suggests that the company is likely an earnings manipulator. A value of −1.01 implies a 15.7% chance of earnings manipulation.

Fundamentals And Technical Analysis

SLM Corporation is currently trading at $9.58/share, up 1.8% for the day. The company is trading at approximately 77.3% of its 52-week high of $12.32/share. The company’s stock price is up 38.8% since the last earnings report and up 8.0% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 81.87 suggests the company is trading in technically overbought territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:SLM Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 6.76 and a forward P/E multiple of 8.61.

SLM Corporation’s current share price also implies a price-to-book (P/B) multiple of 2.23. The following table summarizes some other key fundamental ratios:

Data as of October 19, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $9.58
P/E Ratio 6.8x
P/E Ratio (Fwd) 8.6x
PEG Ratio 1.5
Total Debt / Total Capital 53.0%
Levered Free Cash Flow -$14.742 million
Price To Sales 2.8x

Finbox

SLM Corporation is a mid-cap stock with a market capitalization of $3.531 billion. The company operates in the Financials sector and the Consumer Finance industry.

SLM Corporation, through its subsidiaries, originates and services private education loans to students and their families to finance the cost of their education in the United States. It also offers retail deposit accounts, including certificates of deposit, money market deposit accounts, and high-yield savings accounts; omnibus accounts; and a consumer savings network that provides financial rewards on everyday purchases to help families save for college. The company was formerly known as New BLC Corporation and changed its name to SLM Corporation in December 2013. SLM Corporation was founded in 1972 and is headquartered in Newark, Delaware.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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