Major payments company, American Express Company (AXP Quick QuoteAXP - Free Report) , is set to report fourth-quarter 2024 results on Jan. 24, 2025, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $3.03 per shareon revenues of $17.18 billion.

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The fourth-quarter earnings estimate has moved north by a cent over the past seven days. The bottom-line projection indicates a year-over-year increase of 15.7%. The Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 8.7%.

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For the current year, the Zacks Consensus Estimate for AmEx’s revenues is pegged at $65.95 billion, implying a rise of 9% year over year. Also, the consensus mark for current year EPS is pegged at $13.40, implying a jump of around 19.5% on a year-over-year basis.

AmEx beat the consensus estimate for earnings in three of the last four quarters and missed once, with the average surprise being 6.5%.

Q4 Earnings Whispers for AXP

Our proven model predicts a likely earnings beat for the company this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. That’s precisely the case here.

American Express has an Earnings ESP of +0.36% and a Zacks Rank #3.

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What’s Shaping AXP’s Q4 Results?

American Express is expected to have witnessed a rise in network volumes during the fourth quarter, continuing the trend seen in the past quarters. This uptick is likely attributable to the resilient consumer spending of AXP’s premium customer base, which is less impacted by economic downturns and inflation. The Zacks Consensus Estimate for fourth-quarter total network volumes indicates 5.6% year-over-year growth from $434.4 billion.

Discount revenues, a key source of revenues for AmEx, are likely to have benefited from rising network volumes. The Zacks Consensus Estimate for fourth-quarter Discount revenues indicates 6.1% year-over-year growth.

In the fourth quarter, Travel and Entertainment (T&E) is anticipated to have sustained its growth trend, resulting in increased T&E-related spending. Fees, commissions and other revenues are expected to have improved, driven by an upturn in travel-related income. The Zacks Consensus Estimate for the fourth-quarter International Card Service billed business indicates a 13% improvement from the year-ago period. Similarly, billed businesses in U.S. Consumer Services and Commercial Services are expected to have witnessed growth of 5.8% and 1.1% year over year, respectively.

Cards-in-force is likely to have witnessed an uptick in the quarter under review due to its expanding product offerings and enhancing mobile platforms improving the customer experience. The Zacks Consensus Estimate for fourth-quarter total cards-in-force indicates 5.2% year-over-year growth. The consensus estimate for Average Card Member loans also implies a 12.4% year-over-year increase.

AmEx’s interest income, another major revenue contributor, is likely to have risen on higher loan receivables. The Zacks Consensus Estimate for AXP’s total interest income suggests an upside of 11.6% from the year-ago reported figure of $5.6 billion.

The factors mentioned above are expected to have positioned American Express for not only year-over-year growth but also an earnings beat. However, an increase in expenses, card member services, marketing and salaries is likely to have trimmed margin growth, partially offsetting the positive impacts. Fourth-quarter client engagement costs are likely to have increased due to expanding Card Member spending and higher usage of travel-related benefits. The company is expected to have witnessed higher provision for credit losses in the fourth quarter.

AXP’s Price Performance & Valuation

AmEx’s stock has gained 71.9% in the past year, outperforming the industry’s growth of 22.3%. Some of its peers, like Visa Inc. (V Quick QuoteV - Free Report) and Mastercard Incorporated (MA Quick QuoteMA - Free Report) , have returned 19.4% and 20.1%, respectively, during this time. AXP stock has outpaced the S&P 500 Index as well, which has increased 24.8% during the same period.

Price Performance – AXP, V, MA, Industry & S&P 500

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Now, let’s look at the value American Express offers investors at current levels.

Currently, AXP is trading at 20.70X forward 12-months earnings, above its five-year median of 16.49X and the industry’s average of 16.16X, indicating investors’ confidence in its operations. It is also much cheaper compared to its peers like Visa and Mastercard, which are valued at 27.78X and 32.22X F12M P/E, respectively.

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How to Play American Express Stock Now?

AmEx thrives by blending banking and credit card expertise, driven by strong credit performance, rising cardmember spending and diversified lending. Its loyal, high-spending clientele boosts card fees and retention, while robust cash flow supports investments and shareholder returns. Strategic marketing targets Gen Z and millennials, aiming to secure lifelong loyalty and sustained growth. With a growing customer base and focus on premium services, AmEx remains poised to enhance earnings and revenues, appealing to long-term investors. As such, current investors can hold onto their shares.

While AXP’s long-term growth potential looks promising due to its strategic moves, it may not be the most favorable time for new investors to buy in. The company’s exposure to credit risk and rising expenses weigh on its profitability. Its provisions for credit losses have been increasing.The broader economic environment is in a transitional phase, with inflation cooling, rate cuts taking place and savings accumulated during the COVID-19 era shrinking. How these factors will influence consumer spending trends in the coming months remains uncertain.

We expect the company to deliver an earnings surprise in its upcoming report, which should sustain the stock price momentum. Current shareholders might benefit from holding, while new investors may want to wait for a more favorable valuation entry point.