(SLM) SLM Corporation – Bull of the Day

We are upgrading our recommendation on SLM Corporation (SLM) to Outperform. Its second quarter 2011 core earnings beat the Zacks Consensus Estimate, on the back of an increase in student loan originations, improved credit quality as well as a decline in operating expenses. We believe that the company’s leading position in the student lending market, its cost curtailment initiatives and the federal student loan assets acquisition augur well.

We believe that SLM’s diversifying efforts, coupled with an economic recovery — though at a sluggish pace — will bolster its earnings by expanding its private education loan business and reducing its loan loss provision expenses. Capital deployment efforts also boost investors’ confidence in the stock.

Our six-month target price of $16.00 equates with 8.7x our earnings estimate for 2011. Combined with a quarterly dividend of $0.10 per share, this target price implies an expected total return of about 23.9% over that period. This is consistent with our Outperform recommendation on the shares.

SLM CORP (SLM): Free Stock Analysis Report

Zacks Investment Research

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