Short Term Doubts Weigh on SLM (NYSE:SLM)

SLM Corp. (NYSE:SLM) has to prove to shareholders and investors that they can reach beyond the Federal Family Education Loan Program (FFELP), which it was dropped, and generate earnings growth through other means, while maintaining their dividend.

Barclays (NYSE:BCS) noted, "As SLM transitions its business model to private lending and government loan servicing after the elimination of the Federal Family Education Loan Program (FFELP), investors are wondering if management can generate earnings growth and return cash to shareholders in the near future. Despite large debt maturity hurdles through 2014, we estimate that SLM has sufficient liquidity and cash flow to meet its obligations and pay a regular dividend or commence a share buyback program in 2011. We also believe that the company should be able to grow earnings over the next few years (mostly from lower opex and provisions), and we view $1.50 as a potential floor for core EPS even if earnings shrink in later years (post-2015) due to FFELP loan run-off or increased competition in the private student loan market."

"We are also raising our full-year 2010 core EPS estimate to $1.81 to reflect higher than expected debt repurchase gains and FFELP loan spread in 4Q10, and are increasing our 2011 EPS estimate to $1.57, primarily due to expectations for lower credit costs and opex."

Barclays reiterates an "Equalweight" on SLM Corp., which closed Thursday at $12.03, down $0.02, or 0.17 percent. They have a price target of $15 on them.