U.S. Markets open in 44 mins
  • S&P Futures

    3,634.75
    +7.50 (+0.21%)
     
  • Dow Futures

    29,889.00
    +61.00 (+0.20%)
     
  • Nasdaq Futures

    12,197.00
    +44.75 (+0.37%)
     
  • Russell 2000 Futures

    1,842.70
    -1.90 (-0.10%)
     
  • Crude Oil

    45.48
    -0.23 (-0.50%)
     
  • Gold

    1,810.20
    -1.00 (-0.06%)
     
  • Silver

    23.25
    -0.19 (-0.81%)
     
  • EUR/USD

    1.1923
    +0.0010 (+0.0835%)
     
  • 10-Yr Bond

    0.8780
    -0.0040 (-0.45%)
     
  • Vix

    21.44
    -0.20 (-0.92%)
     
  • GBP/USD

    1.3322
    -0.0034 (-0.2545%)
     
  • USD/JPY

    104.1730
    -0.0770 (-0.0739%)
     
  • BTC-USD

    16,860.68
    -305.97 (-1.78%)
     
  • CMC Crypto 200

    329.74
    -40.77 (-11.00%)
     
  • FTSE 100

    6,339.49
    -23.44 (-0.37%)
     
  • Nikkei 225

    26,644.71
    +107.40 (+0.40%)
     

American Express Q2 Earnings Beat Estimates, Decline Y/Y

Zacks Equity Research
·4 min read

American Express Co. AXP delivered second-quarter 2020 earnings of 29 cents per share, beating the Zacks Consensus Estimate by 123%. However, the bottom line plunged 86% year over year.

The quarter also reflected softness in spending volumes as a result of the adverse COVID-19 impact.

Further, total revenues of $7.7 billion missed the Zacks Consensus Estimate by 2.5% and also declined 28.7% year over year. The top line was affected by a drop in Card Member spending and lower average discount rate.

Meanwhile, total expenses of $5.5 billion decreased 29% year over year owing to lower customer engagement costs on the back of limited Card Member spending as well as controlled usage of travel-related Card Member benefits.

Total provision of $1.6 billion soared 86% year over year as the company added $628 million to its capital reserves in a bid to strengthen its balance sheet in the light of a significant deterioration in the global macroeconomic outlook as a result of the coronavirus adversity.

Return on equity of 18.9% declined 1450 basis points year over year.

American Express Company Price, Consensus and EPS Surprise

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

Lackluster Performance at Segments

American Express’ Global Consumer Services segment reported net income of $527 million, down 40% year over year. Total revenues, net of interest expenses of $4.6 billion decreased 23% year over year, reflecting a fall in Card Member spending and a lower average discount rate from the prior-year levels.

Global Commercial Services incurred a net loss of $60 million against net income of $561 million a year ago. Total revenues, net of interest expenses, were $2.3 billion. This, in turn, plunged 30.3% year over year, mirroring a decline in Card Member spending and a lower average discount rate.

Global Merchant and Network Services’ net income plummeted 88% year over year to $66 million in the reported quarter. Total revenues and net of interest expenses were down 41% year over year to $929 million.

Strong Financial Position (as of Jun 30, 2020)

Cash and cash equivalents were $41 billion, up 52% year over year. Total long-term debt of $49 billion was down 15.5% year over year.

Business Update

The company recently launched its largest-ever Shop Small campaign and committed more than $200 million over the next three months to help jumpstart spending at small merchants in more than a dozen countries, globally.

The company extended its digital solutions for its commercial customers with the recent launch of American Express One AP, its first proprietary accounts payable automation offering. For its merchant partners, it raised its contactless transaction thresholds across 60 countries around the world. It also became the first foreign payments network to be licensed to clear local currency transactions in mainland China.

Zacks Rank

American Express carries a Zacks Rank #3 (Hold), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Some stocks in the same space poised to deliver a positive earnings surprise this time around are as follows:

Global Payments Inc. GPN has an Earnings ESP of +9.29% and a Zacks Rank of 3, currently.

Mastercard Inc. MA has an Earnings ESP of +1.27% and is Zacks #3 Ranked at present.

PayPal Holdings, Inc. PYPL has an Earnings ESP of +3.96% and is a #3 Ranked player at present.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.

With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.

The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.

Click Here, See It Free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
American Express Company (AXP) : Free Stock Analysis Report
 
Mastercard Incorporated (MA) : Free Stock Analysis Report
 
Global Payments Inc. (GPN) : Free Stock Analysis Report
 
PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research