A month has gone by since the last earnings report for American Express (AXP). Shares have added about 6.4% 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 catalysts.
AmEx Q3 Earnings & Revenues Beat, 2018 Guidance Up
American Express Company (NYSE:AXP) reported third-quarter 2018 adjusted earnings per share of $1.88, beating the Zacks Consensus Estimate by 5.6%. Moreover, the bottom line witnessed a 25.3% year-over-year improvement.
Better-than-expected results were mainly backed by higher card member spending, loans and fee income.
Delving Deeper
Revenues came in at $10.1 billion, beating the Zacks Consensus Estimate by 1.1%. The top line increased 9% year over year, driven by higher loan volumes and an increase in Card Member spending and fees.
Provisions for loss totaled $817 million, up 6% year over year, which is attributable to growth in loan and an increase in higher write-offs, partly offset by stable delinquency rates.
Total expenses of $7.2 billion increased 8% year over year due to higher rewards expense and other customer engagement costs. The effective tax rate declined to 22% from 26% in the year-ago quarter, courtesy of the Tax Act.
Strong Segment Results
American Express’ Global Consumer Services segment reported net income of $779 million, up 15% year over year. Total revenues, net of interest expense of $5.4 billion, were up 11% year over year, reflecting higher loans and Card Member spending as well as fee income.
Net income of $606 million at Global Commercial Services was up 20% year over year. Total revenues, net of interest expenses, increased 9% year over year to $3.2 billion, primarily reflecting higher Card Member spending.
Global Merchant and Network Services’ net income rose 30% year over year to $580 million in the reported quarter. Total revenues, net of interest expenses, inched up 2% year over year to $1.6 billion on higher Card Member spending, partially offset by an expected decrease in the average discount rate and lower revenues from network partners.
Corporate and Other reported net loss of $311 million, wider than $246 million loss incurred in the year-ago quarter.
2018 Guidance Update
On the back of strong results in the first nine months of 2018, the company pulled up its earnings guidance. It now expects full-year 2018 revenues to be up 9% to 10% compared with earlier guidance of at least 9%.
Adjusted EPS is expected in the range of $7.30 to $7.40, up from the $6.90 to $7.30 range, that was set at the start of the year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, American Express has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise American Express has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
American Express Company (AXP): Free Stock Analysis Report
Original post