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American Express Company (AXP - Free Report) reported second-quarter 2024 earnings per share (EPS) of $3.49, which beat the Zacks Consensus Estimate by 8.4%. The bottom line climbed 20.8% year over year.
Total revenues net of interest expense amounted to $16.3 billion, which missed the Zacks Consensus Estimate by 1.5%. However, the top line improved 8.5% year over year in the quarter under review.
The better-than-expected second-quarter 2024 earnings benefited from rising net interest income and growth in the customer base of Millennials and Gen-Z, driving growth in the U.S. Consumer Services Billed business. Increased card member spending and fee growth also benefited the results. The results were partially offset by escalating customer engagement and marketing expenses.
American Express Company Price, Consensus and EPS Surprise
Network volumes of $440.6 billion rose 3.3% year over year in the second quarter on the back of higher consumer spending. However, the figure lagged the Zacks Consensus Estimate of $448.2 billion. Total interest income of $5.79 billion increased 21% year over year but missed the consensus mark of $5.8 billion.
Provision for credit losses escalated 6% year over year to $1.3 billion due to a rise in net write-offs partially offset by a reduced net reserve build.
Total expenses increased 1% year over year to $11.3 billion due to an elevated customer engagement cost level, which resulted from expanding Card Member spending, higher usage of travel-related benefits and marketing expenses.
Segmental Performances
The U.S. Consumer Services segment’s pre-tax income of $1.6 billion advanced 24.8% year over year in the second quarter and beat the Zacks Consensus Estimate of $1.3 billion. Total revenues net of interest expense climbed 11.6% year over year to $7.7 billion on the back of improved net interest income and higher Card Member spending. Growth in the customer base of Gen-Z and Millennials also favored this segment’s results.
The Commercial Services segment recorded a pre-tax income of $905 million in the quarter under review, which rose 26.9% year over year but missed the Zacks Consensus Estimate by 10%. Total revenues net of interest expense amounted to $4 billion, which grew 6% year over year on the back of an increase in net interest income. The reported figure beat the consensus mark of $3.9 billion.
The International Card Services segment reported a pre-tax income of $290 million in the second quarter, which rose 14.6% year over year and beat the consensus mark by 18.9%. Total revenues net of interest expense improved 9.2% year over year to $2.8 billion, missing the consensus mark of $2.9 billion. The year-over-year growth was attributable to expanding Card Member spending and rising card fee revenues.
The Global Merchant and Network Services segment’s pre-tax net income of $1.5 billion advanced 59.6% year over year in the quarter under review and beat the Zacks Consensus Estimate of $1 billion. Total revenues net of interest expense rose 0.5% year over year to $1.9 billion on the back of growth in merchant-related revenues.
Corporate and Other incurred a pre-tax loss of $502 million in the second quarter, wider than the prior-year quarter’s loss of $445 million.
Balance Sheet (as of Jun 30, 2024)
American Express exited the second quarter with cash & cash equivalents of $52.9 billion, which rose from $46.6 billion at 2023-end. Total assets of $272.2 billion rose from $261.1 billion at 2023-end.
Long-term debt amounted to $51.5 billion, which increased from $47.9 billion at 2023-end. Short-term borrowing was $1.6 billion.
Shareholders’ equity of $29.5 billion improved 11% year over year.
Return on average common equity improved 860 basis points year over year to 43.2%.
Capital Deployment Update
American Express bought back 7 million common shares in the second quarter of 2024. The company paid a per share dividend worth 70 cents in the second quarter of 2024.
2024 Outlook Revised
AXP continues to anticipate revenues to increase between 9% and 11% in 2024 from the 2023 level of $60.5 billion. Management revised its earnings per share estimate upward to the range of $13.30-$13.80, the mid-point of which indicates an improvement of 20.9% from the 2023 level of $11.21. This new range incorporates gains from the sale of Accertify, amounting to $0.66 per share.
Long-Term View
The company earlier expected revenue growth of more than 10% over the long term, while EPS is likely to continue registering mid-teens growth.
Zacks Rank and Key Picks
American Express currently carries a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for Jackson Financial’s current-year earnings is pegged at $17.33 per share, which indicates 35% year-over-year growth. It witnessed two upward estimate revisions in the past 30 days against no downward movement. The consensus mark for HUT’s current-year revenues suggests a 116.7% surge from a year ago.
The Zacks Consensus Estimate for WisdomTree’s 2024 earnings indicates 51.4% year-over-year growth. During the past two months, WT has witnessed one upward estimate revision against none in the opposite direction. It met earnings estimates thrice in the past four quarters and beat once, with an average surprise of 2.3%.
The Zacks Consensus Estimate for HIVE Digital’s current-year earnings suggests a 29.1% year-over-year improvement. During the past month, HIVE has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for current-year revenues is pegged at $111.8 million.
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AmEx (AXP) Beats on Q2 Earnings Estimates, Ups '24 EPS View
American Express Company (AXP - Free Report) reported second-quarter 2024 earnings per share (EPS) of $3.49, which beat the Zacks Consensus Estimate by 8.4%. The bottom line climbed 20.8% year over year.
Total revenues net of interest expense amounted to $16.3 billion, which missed the Zacks Consensus Estimate by 1.5%. However, the top line improved 8.5% year over year in the quarter under review.
The better-than-expected second-quarter 2024 earnings benefited from rising net interest income and growth in the customer base of Millennials and Gen-Z, driving growth in the U.S. Consumer Services Billed business. Increased card member spending and fee growth also benefited the results. The results were partially offset by escalating customer engagement and marketing expenses.
American Express Company Price, Consensus and EPS Surprise
American Express Company price-consensus-eps-surprise-chart | American Express Company Quote
Q2 Operational Performance
Network volumes of $440.6 billion rose 3.3% year over year in the second quarter on the back of higher consumer spending. However, the figure lagged the Zacks Consensus Estimate of $448.2 billion. Total interest income of $5.79 billion increased 21% year over year but missed the consensus mark of $5.8 billion.
Provision for credit losses escalated 6% year over year to $1.3 billion due to a rise in net write-offs partially offset by a reduced net reserve build.
Total expenses increased 1% year over year to $11.3 billion due to an elevated customer engagement cost level, which resulted from expanding Card Member spending, higher usage of travel-related benefits and marketing expenses.
Segmental Performances
The U.S. Consumer Services segment’s pre-tax income of $1.6 billion advanced 24.8% year over year in the second quarter and beat the Zacks Consensus Estimate of $1.3 billion. Total revenues net of interest expense climbed 11.6% year over year to $7.7 billion on the back of improved net interest income and higher Card Member spending. Growth in the customer base of Gen-Z and Millennials also favored this segment’s results.
The Commercial Services segment recorded a pre-tax income of $905 million in the quarter under review, which rose 26.9% year over year but missed the Zacks Consensus Estimate by 10%. Total revenues net of interest expense amounted to $4 billion, which grew 6% year over year on the back of an increase in net interest income. The reported figure beat the consensus mark of $3.9 billion.
The International Card Services segment reported a pre-tax income of $290 million in the second quarter, which rose 14.6% year over year and beat the consensus mark by 18.9%. Total revenues net of interest expense improved 9.2% year over year to $2.8 billion, missing the consensus mark of $2.9 billion. The year-over-year growth was attributable to expanding Card Member spending and rising card fee revenues.
The Global Merchant and Network Services segment’s pre-tax net income of $1.5 billion advanced 59.6% year over year in the quarter under review and beat the Zacks Consensus Estimate of $1 billion. Total revenues net of interest expense rose 0.5% year over year to $1.9 billion on the back of growth in merchant-related revenues.
Corporate and Other incurred a pre-tax loss of $502 million in the second quarter, wider than the prior-year quarter’s loss of $445 million.
Balance Sheet (as of Jun 30, 2024)
American Express exited the second quarter with cash & cash equivalents of $52.9 billion, which rose from $46.6 billion at 2023-end. Total assets of $272.2 billion rose from $261.1 billion at 2023-end.
Long-term debt amounted to $51.5 billion, which increased from $47.9 billion at 2023-end. Short-term borrowing was $1.6 billion.
Shareholders’ equity of $29.5 billion improved 11% year over year.
Return on average common equity improved 860 basis points year over year to 43.2%.
Capital Deployment Update
American Express bought back 7 million common shares in the second quarter of 2024. The company paid a per share dividend worth 70 cents in the second quarter of 2024.
2024 Outlook Revised
AXP continues to anticipate revenues to increase between 9% and 11% in 2024 from the 2023 level of $60.5 billion. Management revised its earnings per share estimate upward to the range of $13.30-$13.80, the mid-point of which indicates an improvement of 20.9% from the 2023 level of $11.21. This new range incorporates gains from the sale of Accertify, amounting to $0.66 per share.
Long-Term View
The company earlier expected revenue growth of more than 10% over the long term, while EPS is likely to continue registering mid-teens growth.
Zacks Rank and Key Picks
American Express currently carries a Zacks Rank #3 (Hold).
Investors interested in the broader Finance space may look at some better-ranked players like Jackson Financial Inc. (JXN - Free Report) , WisdomTree, Inc. (WT - Free Report) , and HIVE Digital Technologies Ltd. (HIVE - 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 Jackson Financial’s current-year earnings is pegged at $17.33 per share, which indicates 35% year-over-year growth. It witnessed two upward estimate revisions in the past 30 days against no downward movement. The consensus mark for HUT’s current-year revenues suggests a 116.7% surge from a year ago.
The Zacks Consensus Estimate for WisdomTree’s 2024 earnings indicates 51.4% year-over-year growth. During the past two months, WT has witnessed one upward estimate revision against none in the opposite direction. It met earnings estimates thrice in the past four quarters and beat once, with an average surprise of 2.3%.
The Zacks Consensus Estimate for HIVE Digital’s current-year earnings suggests a 29.1% year-over-year improvement. During the past month, HIVE has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for current-year revenues is pegged at $111.8 million.