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American Express (AXP) Q4 Earnings Beat on Higher Revenues

Sapna Bagaria

American Express Co. AXP reported fourth-quarter 2019 earnings of $2.03 per share, which surpassed the Zacks Consensus Estimate by 1.5% and were up 16.7% year over year.

Total revenues of $11.4 billion came in line with the Zacks Consensus Estimate and were up 9% year over year.  This is the 10th straight quarter in which the company posted foreign exchange adjusted revenue growth of at least 8%. Increase in earnings was driven by a well-balanced mix of growth in fee, spend and lend revenues.

Total expenses of $8.4 billion increased 9% year over year, due to growth in rewards and other customer engagement costs driven by increased Card Member spending, and higher usage of card benefits and operating expenses.

American Express Company Price, Consensus and EPS Surprise

American Express Company Price, Consensus and EPS Surprise

American Express Company price-consensus-eps-surprise-chart | American Express Company Quote

 

2019 Results

The company reported earnings per share of $8.20, up 11.9% year over year. Revenues net of interest expense for the full year were $43.6 billion, up 9%, on a constant-currency basis.

In 2019, the company added 11.5 million new proprietary cards and continued to deliver solid billings growth.

Segment Update

American Express’ Global Consumer Services segment reported net income of $846 million, up 21% year over year. Total revenues, net of interest expenses of $6.2 billion, were up 10% year over year, reflecting higher net interest income, card fees and Card Member spending.

Global Commercial Services’ net income of $617 million was down 1% year over year. Total revenues, net of interest expenses, increased 7% year over year to $3.5 billion, primarily reflecting higher Card Member spending, net interest income and card fees.

Global Merchant and Network Services’ net income rose 10% year over year to $549 million in the reported quarter. Total revenues and net of interest expenses were up 3% year over year to $1.7 billion.

2020 Guidance

For 2020, the company expects revenue growth in the range of 8% to 10%, on a foreign exchange-adjusted basis and earnings of $8.85-$9.25 per share.

Our Take

American Express’ results reflect the success of its strategy to generate sustainable and profitable growth across the enterprise over the long term.

The company was able to achieve its goal (set in 2016) of virtual parity merchant coverage in the United States as of year-end 2019. This achievement is crucial in driving growth.

The company also continues to make investments to increase its share, scale and relevance. It has refreshed a number of its card products and co-brand portfolios globally. These have resulted in greater customer engagement and strong new card acquisitions. The company is also making good progress on digital front by making massive investments in technology.

Overall, the company’s consistent performance, along with continued investments in product innovation and growth opportunities, paves the path for long-term growth.

Zacks Rank & Stocks to Consider

American Express carries a Zacks Rank #3 (Hold). Some better-ranked companies in the same space are CIT Group Inc. CIT, Moody’s Corp. MCO and AXA Equitable Holdings, Inc. EQH. Each of these stocks carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CIT Group, Moody’s and AXA Equitable Holdings surpassed their estimates in the last four reported quarters by 8.77%, 4.51% and 12.4%, on average, respectively.

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Moody's Corporation (MCO) : Free Stock Analysis Report
 
CIT Group Inc. (CIT) : Free Stock Analysis Report
 
American Express Company (AXP) : Free Stock Analysis Report
 
AXA Equitable Holdings, Inc. (EQH) : Free Stock Analysis Report
 
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