A month has gone by since the last earnings report for American Express (AXP). Shares have added about 4.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is American Express due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
American Express Q1 Earnings Beat, Revenues Miss
American Express Company’s adjusted earnings of $2.01 per share beat the Zacks Consensus Estimate by 0.5% and grew 8% year over year in first-quarter 2019. Higher-than-expected billings and loan growth led to the earnings outperformance.
Revenues (net of interest expenses) came in at $10.4 billion, missing the Zacks Consensus Estimate by 1.2%. The top line increased 7% year over year, driven by higher loan volumes, and an increase in Card Member spending and fees. Excluding the effect of foreign exchange rates, adjusted revenues, net of interest expenses, grew 9%.
Provisions for loss totaled $809 million, up 4% year over year, which was attributable to growth in loan and receivable portfolio and an increase in higher write-offs.
Total expenses of $7.6 billion increased 11% year over year due to higher customer engagement costs and litigation-related charge.
The company was successful in expanding its merchant network and added 3.1 million new proprietary cards in the quarter driven primarily by its digital acquisition initiatives.
Strong Segmental Results
American Express’ Global Consumer Services segment reported net income of $821 million, down 1% year over year. Total revenues, net of interest expenses of $5.6 billion, were up 9% year over year, reflecting higher loans, Card Member spending and fee income.
Global Commercial Services’ net income of $586 million was up 7% year over year. Total revenues, net of interest expenses, increased 6% year over year to $3.2 billion, primarily reflecting higher Card Member spending.
Global Merchant and Network Services’ net income rose 22% year over year to $631 million in the reported quarter. Total revenues, net of interest expenses, remained stable year over year at $1.6 billion.
2019 Guidance Affirmed
The company backed up its earlier guidance for 2019, which calls for earnings of $7.85 to $8.35 per share and revenue growth between 8% and 10%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
At this time, American Express has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
American Express has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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