Navient sells healthcare unit to CorroHealth for $365 million

HERNDON, Va. - Navient (NASDAQ:NAVI) Corporation (NASDAQ:NAVI), a leader in education finance and business processing solutions, has agreed to sell its Healthcare Services (NASDAQ:HCSG) business to CorroHealth for a cash consideration of $365 million, subject to customary adjustments. This move comes as part of Navient's strategic efforts to streamline its operations and focus on its core business segments.

The Healthcare Services business, known as Xtend Healthcare, is based in Hendersonville, Tenn., and specializes in healthcare revenue cycle management. CorroHealth, which is acquiring Xtend, plans to continue operating the business from its current location. Approximately 950 Xtend employees are expected to transition to CorroHealth as part of the deal.

Navient's President and CEO, Dave Yowan, expressed that the sale is a significant step in the company's initiative to explore strategic options for its Business Processing Solutions division. He also noted that CorroHealth is well-suited to take Xtend Healthcare forward.

CorroHealth CEO Pat Leonard welcomed the addition of Xtend, highlighting the expanded suite of solutions and strengthened financial position it will provide for their customers. Mike Morris, CEO of Xtend Healthcare, echoed Leonard's enthusiasm, anticipating the broader capabilities and automation tools they will be able to offer as part of CorroHealth.

The transaction is expected to close by the end of September, with certain conditions yet to be met. The financial impact of the sale on Navient's statements has not been finalized and will depend on various factors, including net sale proceeds and the book value at the time of closing. As of June 30, 2024, the book value of the Healthcare Services business stood at approximately $136 million.

Navient also disclosed ongoing discussions regarding the potential sale of its Government Services businesses, though the financial outcomes of this process are currently uncertain.

In other recent news, Navient Corporation has reported significant progress in its strategic restructuring efforts during its second quarter 2024 earnings call. The company has updated its full-year 2024 earnings per share (EPS) guidance to $1.35 to $1.55.

This revision reflects the impact of strategic initiatives such as a servicing outsourcing agreement with MOHELA and ongoing discussions for the divestment of its business processing solutions (BPS) division.

In addition, Navient is exploring opportunities to deepen relationships with students and college graduates through its Earnest business. The company remains confident in hitting its growth target for lending for the year. As part of its financial strategy, Navient may reduce outstanding debt or distribute cash to shareholders. These are among the recent developments that investors should be aware of.

InvestingPro Insights

As Navient Corporation (NASDAQ:NAVI) progresses with its strategy to divest non-core assets, such as Xtend Healthcare, the company's financial health remains a focal point for investors. According to InvestingPro data, Navient currently holds a market capitalization of $1.62 billion, with a compelling price-to-earnings (P/E) ratio of 10.62. This valuation may attract investors looking for potentially undervalued opportunities, especially when considering the adjusted P/E ratio for the last twelve months as of Q2 2024, which stands at an even lower 8.78.

Investors are also eyeing the company's dividend track record, as Navient has sustained dividend payments for 14 consecutive years. This consistency is underpinned by a solid dividend yield of 4.44%, as of the latest data from 2024. Additionally, Navient's commitment to returning value to shareholders is evident through management's aggressive share buyback initiatives, as noted in one of the InvestingPro Tips.

Despite analysts revising their earnings downwards for the upcoming period and anticipating a sales decline in the current year, Navient's liquid assets still exceed its short-term obligations. This financial stability, coupled with the expectation of profitability this year, as per another InvestingPro Tip, suggests a resilient operational footing amidst the strategic shifts.

For readers interested in a deeper dive into Navient's financial outlook, InvestingPro offers additional tips, with seven more insightful analyses available on their platform. These tips provide a comprehensive view of the company's potential trajectory following the sale of its Healthcare Services business.

With the next earnings date set for October 22, 2024, stakeholders will be closely monitoring how these strategic changes impact Navient's bottom line. The InvestingPro Fair Value estimate currently stands at $17.96, which exceeds the analyst target of $15, indicating potential upside from the previous close price of $14.41.

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