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Here's Why Hold Strategy is Apt for AmEx (AXP) Stock Now
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American Express Company (AXP - Free Report) is well-poised to grow on the back of improving international business, strategic acquisitions, bringing new customers and investments in digital technology. The ongoing recovery in travel-related spending in the international markets is a major tailwind for AmEx.
AmEx — with a market cap of $133.3 billion — is a diversified financial services company, offering charge and credit payment card products, and travel-related services worldwide. Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
The Trend in Estimates
The Zacks Consensus Estimate for AXP’s current-year earnings is pegged at $11.24 per share, indicating 14.1% year-over-year growth. The stock has witnessed three upward estimate revisions in the past 30 days against none in the opposite direction.
The consensus mark for current-year revenues stands at $61.1 billion, suggesting a 15.6% rise from the prior-year reported number. In the long-term, the company foresees revenue growth of more than 10% and earnings growth in the mid-teens.
Earnings Surprise History
American Express beat on earnings in three of the last four quarters and missed once, the average surprise being 4.5%. This is depicted in the graph below.
AmEx’s market share in the international market, except in the United Kingdom, is comparatively low, giving the company ample development opportunity ahead. The company is expected to register rapid growth from employing its success formula from the domestic market in recovering economies around the globe.
With its expanding footprint in the global market and capturing the younger demographic, the company’s network volumes are bound to increase. Its network volumes jumped 12% year over year to $413.3 billion in the fourth quarter of 2022, thanks to rising spending levels.
The company’s tailored card products for small and mid-sized enterprises put it above competitors. Also, AXP is expected to keep investing in technology, which positions it well to capitalize on the growing demand for digital payments.
Last year, the company highlighted its intention of boosting technology-related hiring. While other companies were cutting jobs due to economic uncertainty, AmEx’s rapid tech hiring reflects its confidence in its capabilities to navigate through any downturns and the business’ resilience.
AmEx’s measures to reward shareholders through dividends and share buybacks are noteworthy. Owing to its solid capital position, the company returned $4.9 billion to its shareholders in 2022. Further, it intends to hike dividends by 15% to 60 cents per share, starting from the first quarter of 2023.
Key Risks
However, there are a few factors that might hinder the stock’s growth.
Rising expenses are putting pressure on its margins. The increase in reward expenses and card member services will weigh on the bottom line. Last year, expenses jumped 24% year over year.
Also, AXP’s 12-month forward price-to-earnings multiple of 15.6X is higher than 11.8X of the industry, making it a little expensive at the current level. Nevertheless, we believe that a systematic and strategic plan of action will drive AmEx’s growth in the long term.
The Zacks Consensus Estimate for Euronet Worldwide’s 2023 earnings predicts 14.8% year-over-year growth. Over the past 30 days, EEFT has witnessed four upward estimate revisions against one in the opposite direction.
The consensus mark for Arthur J. Gallagher’s 2023 earnings indicates a 13.2% year-over-year increase. Furthermore, the consensus estimate for AJG’s revenues in 2023 suggests 12.5% year-over-year growth.
The Zacks Consensus Estimate for Ares Capital’s 2023 earnings suggests 16.8% year-over-year growth. Also, the consensus mark for ARCC’s revenues in 2023 suggests 23% year-over-year growth.
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Here's Why Hold Strategy is Apt for AmEx (AXP) Stock Now
American Express Company (AXP - Free Report) is well-poised to grow on the back of improving international business, strategic acquisitions, bringing new customers and investments in digital technology. The ongoing recovery in travel-related spending in the international markets is a major tailwind for AmEx.
AmEx — with a market cap of $133.3 billion — is a diversified financial services company, offering charge and credit payment card products, and travel-related services worldwide. Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
The Trend in Estimates
The Zacks Consensus Estimate for AXP’s current-year earnings is pegged at $11.24 per share, indicating 14.1% year-over-year growth. The stock has witnessed three upward estimate revisions in the past 30 days against none in the opposite direction.
The consensus mark for current-year revenues stands at $61.1 billion, suggesting a 15.6% rise from the prior-year reported number. In the long-term, the company foresees revenue growth of more than 10% and earnings growth in the mid-teens.
Earnings Surprise History
American Express beat on earnings in three of the last four quarters and missed once, the average surprise being 4.5%. This is depicted in the graph below.
American Express Company Price and EPS Surprise
American Express Company price-eps-surprise | American Express Company Quote
Key Markers
AmEx’s market share in the international market, except in the United Kingdom, is comparatively low, giving the company ample development opportunity ahead. The company is expected to register rapid growth from employing its success formula from the domestic market in recovering economies around the globe.
With its expanding footprint in the global market and capturing the younger demographic, the company’s network volumes are bound to increase. Its network volumes jumped 12% year over year to $413.3 billion in the fourth quarter of 2022, thanks to rising spending levels.
The company’s tailored card products for small and mid-sized enterprises put it above competitors. Also, AXP is expected to keep investing in technology, which positions it well to capitalize on the growing demand for digital payments.
Last year, the company highlighted its intention of boosting technology-related hiring. While other companies were cutting jobs due to economic uncertainty, AmEx’s rapid tech hiring reflects its confidence in its capabilities to navigate through any downturns and the business’ resilience.
AmEx’s measures to reward shareholders through dividends and share buybacks are noteworthy. Owing to its solid capital position, the company returned $4.9 billion to its shareholders in 2022. Further, it intends to hike dividends by 15% to 60 cents per share, starting from the first quarter of 2023.
Key Risks
However, there are a few factors that might hinder the stock’s growth.
Rising expenses are putting pressure on its margins. The increase in reward expenses and card member services will weigh on the bottom line. Last year, expenses jumped 24% year over year.
Also, AXP’s 12-month forward price-to-earnings multiple of 15.6X is higher than 11.8X of the industry, making it a little expensive at the current level. Nevertheless, we believe that a systematic and strategic plan of action will drive AmEx’s growth in the long term.
Key picks
Some better-ranked stocks in the broader finance space are Euronet Worldwide, Inc. (EEFT - Free Report) , Arthur J. Gallagher & Co. (AJG - Free Report) and Ares Capital Corporation (ARCC - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Euronet Worldwide’s 2023 earnings predicts 14.8% year-over-year growth. Over the past 30 days, EEFT has witnessed four upward estimate revisions against one in the opposite direction.
The consensus mark for Arthur J. Gallagher’s 2023 earnings indicates a 13.2% year-over-year increase. Furthermore, the consensus estimate for AJG’s revenues in 2023 suggests 12.5% year-over-year growth.
The Zacks Consensus Estimate for Ares Capital’s 2023 earnings suggests 16.8% year-over-year growth. Also, the consensus mark for ARCC’s revenues in 2023 suggests 23% year-over-year growth.