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Will Business Loss From Coronavirus Hurt AmEx (AXP) Q2 Earnings?
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American Express Co. (AXP - Free Report) is scheduled to report second-quarter 2020 earnings results on Jul 24.
The Zacks Consensus Estimate for the company’s second-quarter earnings and revenues is pegged at $2.48 per share and $36.66 billion, respectively, indicating a plunge of 69.76% and 15.83% each from the prior-year reported figures.
Factors Likely to Impact Q2 Results
Discount revenues, the company’s largest revenue line, are likely to have declined due to lower billings and a decreased average discount rate. The discount rate downside might have been on account of a shift in spend mix to non-travel and entertainment categories as corporations reduced expenses on trips with governments implementing travel restrictions.
Other fees and commissions, and other revenues are also likely to have suffered COVID-19-related setbacks, primarily due to weak consumer travel commissions and fees, and curbed cross-border spending.
Further, within the company’s Global Commercial Services segment, U.S. Small Business Loans are likely to have shrunk. The monthly data released by the company showed that Small Business loans declined in each of the three months — April, May and June — covering the entire second quarter as these businesses were closed down and consequently, demand dried up due to the COVID-19 outbreak.
In its Global Consumer Services Group segment, U.S. Consumer Card Member Loans are too expected to have taken a hit.
Additionally, the dip in card member loans, both U.S. Small Business Loans and U.S. Consumer Card Member Loans, are likely to have dented net interest income.
The company is likely to report a big loss reserve in the second quarter due to a deterioration in the US Gross Domestic Product and a high unemployment rate. Reserves for Card Member credit losses represent the company’s best estimate for the same in its outstanding portfolio of Card Member loans and receivables as of the balance sheet date.
In a bid to cope with this ongoing economic crisis, the company enhanced its membership rewards programs and added offers, benefits and rewards to its premium products for retaining its existing customers and further pushing them to use its cards. Even though this measure is likely to have increased card member rewards, it escalated services expense.
However, the company halted traditional advertising, marketing, sponsorships and customer acquisition activities, which in turn, might have reined in the related expenses.
Earnings Surprise History
The company boasts an attractive earnings surprise history. Its bottom line beat estimates in each of the last four quarters, delivering a surprise of 5.03%, on average. This is depicted in the chart below:
Our proven model does not conclusively predict an earnings beat for American Express this time around. 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. But that is not the case here as elaborated below. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter
Earnings ESP: American Express has an Earnings ESP of -232.57%.
Zacks Rank: American Express currently has a Zacks Rank of 3.
Stocks to Consider
Some stocks worth considering from the same space with an apt combination of elements to surpass estimates this reporting cycle are as follows:
Global Payments Inc. (GPN - Free Report) has an Earnings ESP of +8.42% and is a #3 Ranked player at present.
Mastercard Inc (MA - Free Report) has an Earnings ESP of +2.52% and is currently Zacks #3 Ranked.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout..
Image: Bigstock
Will Business Loss From Coronavirus Hurt AmEx (AXP) Q2 Earnings?
American Express Co. (AXP - Free Report) is scheduled to report second-quarter 2020 earnings results on Jul 24.
The Zacks Consensus Estimate for the company’s second-quarter earnings and revenues is pegged at $2.48 per share and $36.66 billion, respectively, indicating a plunge of 69.76% and 15.83% each from the prior-year reported figures.
Factors Likely to Impact Q2 Results
Discount revenues, the company’s largest revenue line, are likely to have declined due to lower billings and a decreased average discount rate. The discount rate downside might have been on account of a shift in spend mix to non-travel and entertainment categories as corporations reduced expenses on trips with governments implementing travel restrictions.
Other fees and commissions, and other revenues are also likely to have suffered COVID-19-related setbacks, primarily due to weak consumer travel commissions and fees, and curbed cross-border spending.
Further, within the company’s Global Commercial Services segment, U.S. Small Business Loans are likely to have shrunk. The monthly data released by the company showed that Small Business loans declined in each of the three months — April, May and June — covering the entire second quarter as these businesses were closed down and consequently, demand dried up due to the COVID-19 outbreak.
In its Global Consumer Services Group segment, U.S. Consumer Card Member Loans are too expected to have taken a hit.
Additionally, the dip in card member loans, both U.S. Small Business Loans and U.S. Consumer Card Member Loans, are likely to have dented net interest income.
The company is likely to report a big loss reserve in the second quarter due to a deterioration in the US Gross Domestic Product and a high unemployment rate. Reserves for Card Member credit losses represent the company’s best estimate for the same in its outstanding portfolio of Card Member loans and receivables as of the balance sheet date.
In a bid to cope with this ongoing economic crisis, the company enhanced its membership rewards programs and added offers, benefits and rewards to its premium products for retaining its existing customers and further pushing them to use its cards. Even though this measure is likely to have increased card member rewards, it escalated services expense.
However, the company halted traditional advertising, marketing, sponsorships and customer acquisition activities, which in turn, might have reined in the related expenses.
Earnings Surprise History
The company boasts an attractive earnings surprise history. Its bottom line beat estimates in each of the last four quarters, delivering a surprise of 5.03%, on average. This is depicted in the chart below:
American Express Company Price and EPS Surprise
American Express Company price-eps-surprise | American Express Company Quote
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for American Express this time around. 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. But that is not the case here as elaborated below. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter
Earnings ESP: American Express has an Earnings ESP of -232.57%.
Zacks Rank: American Express currently has a Zacks Rank of 3.
Stocks to Consider
Some stocks worth considering from the same space with an apt combination of elements to surpass estimates this reporting cycle are as follows:
Visa Inc. (V - Free Report) has an Earnings ESP of +2.52% and a Zacks Rank #3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Global Payments Inc. (GPN - Free Report) has an Earnings ESP of +8.42% and is a #3 Ranked player at present.
Mastercard Inc (MA - Free Report) has an Earnings ESP of +2.52% and is currently Zacks #3 Ranked.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout..
See these time-sensitive tickers now >>