American Express Company AXP is set to continue its earnings beat streak in second-quarter 2022, results of which are expected to be released on Jul 22, before the opening bell.
In the last reported quarter, the diversified financial services company’s adjusted earnings per share of $2.73 beat the Zacks Consensus Estimate by 12.3%, primarily due to a continued business momentum and a solid revenue stream. American Express also benefited from better volumes in the quarter under review. AXP added 3 million proprietary cards in the quarter. Travel and Entertainment spending increased 121% year over year on an FX-adjusted basis.
Now, let’s see how things have shaped up prior to the second-quarter earnings announcement.
Trend in Estimate Revision
The Zacks Consensus Estimate of $2.36 for second-quarter earnings per share has witnessed two upward revisions and two downward movements in the past week. The estimate is indicative of a 15.7% decrease from the year-ago reported figure. However, the Zacks Consensus Estimate for second-quarter revenues is pegged at $12.4 billion, suggesting a jump of 21.4% from the year-ago reported figure.
American Express beat earnings estimates in each of the trailing four quarters, delivering an average of 33.3%. This is depicted in the graph below.
American Express Company Price and EPS Surprise
American Express Company price-eps-surprise | American Express Company Quote
What the Quantitative Model Suggests
Our proven model predicts an earnings beat for American Express this time around as well. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.
Earnings ESP: Earnings ESP for the company is currently +0.31%. The Most Accurate Estimate is pegged at $2.37 per share, higher than the Zacks Consensus Estimate of $2.36. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: American Express currently holds a Zacks Rank #3.
Factors Driving Better-Than-Expected Earnings
American Express is likely to have witnessed improved volumes in the to-be-reported quarter, a trend seen over the last few quarters. It might have expanded, owing to total network volumes and billed business volumes. A rise in the overall spending level is likely to have inflated Discount revenues, AXP’s largest revenue driver. The Zacks Consensus Estimate for second-quarter Discount revenues indicates 17.6% year-over-year growth.
Travel and Entertainment (T&E) — which saw a decline due to COVID-19 — is also rapidly recovering, particularly in the United States. T&E spending is expected to have increased in the second quarter of 2022. Fees, commissions and other revenues might have improved on the back of an uptick in travel-related revenues. Card acquisitions in some of AXP’s largest travel co-brand portfolios are likely to have increased.
Cards-in-force is expected to have witnessed an uptick in the quarter under review. The Zacks Consensus Estimate for second-quarter total cards-in-force signals a 9.6% year-over-year jump.
American Express’s net interest income, the second-largest revenue contributor, is likely to have risen on higher loan disbursements. The consensus mark for AXP’s net interest income suggests an upside of 22.8% from the year-ago reported figure.
While the above-mentioned factors are likely to have set the company for an earnings beat in the second quarter, the rising expenses might have played spoilsport. Rising expenses in global commercial services, marketing and business development might have affected the bottom line. This is expected to have positioned AXP for a year-over-year decrease in profits.
Other Stocks That Warrant a Look
Here are some other companies from the broader Financespace that you may also want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time around:
CVB Financial Corp. CVBF has an Earnings ESP of +5.82% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CVB Financial’s bottom line for the to-be-reported quarter is pegged at 38 cents per share. CVBF witnessed one upward estimate revision in the past 30 days against none in the opposite direction.
Synovus Financial Corp. SNV has an Earnings ESP of +0.86% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Synovus Financial’s top line for the to-be-reported quarter is pegged at $521.5 million, implying a 6.7% increase from the year-ago figure. SNV beat earnings estimates in each of the past four quarters, with an average of 14.1%.
CME Group Inc. CME has an Earnings ESP of +0.32% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for CME Group’s bottom line for the to-be-reported quarter indicates a 17.1% jump from a year ago. The consensus mark for CME’s top line indicates a 5.2% year-over-year increase.
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