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Why Is American Express (AXP) Down 4.6% Since the Last Earnings Report?
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A month has gone by since the last earnings report for American Express Company (AXP - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? 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.
American Express Q1 Earnings Beat, 2017 View Intact
American Express' first-quarter adjusted earnings per share (EPS) of $1.34 beat the Zacks Consensus Estimate of $1.28 but declined 8% year over year.
Better-than-expected results were mainly backed by the company’s investments to grow its business coupled with cost control initiatives.
The company reaffirmed its earlier EPS guidance of $5.60–$5.80 for 2017.
Performance in Detail
Revenues of $7.9 billion came in ahead of the Zacks Consensus Estimate of $7.7 billion. However, revenues were down 2% year over year reflecting lower discount revenue and net interest income following the Costco portfolio sale in the second quarter of last year.
Notably, excluding Costco-related business and the effect of foreign exchange rates owing to the impact of a stronger U.S. dollar on international operations during the quarter, adjusted revenues climbed 7% driven by higher adjusted Card Member spending and adjusted net interest income.
American Express acquired 2.6 million new card users globally and “card member spending grew 8%.”
Provisions for losses totaled $573 million, up 32% year over year, reflecting higher loan growth, receivables and net write-offs.
Total expenses of $5.5 billion increased 1% year over year, led by higher rewards’ expenses as the company added new features to its products to woo customers.
Total operating costs during the quarter were down 3% year over year. The company continued to progress on its cost reduction initiatives and is on track to remove $1 billion from cost based on a run rate basis by the end of 2017.
The effective tax rate was 33%, reflecting a decrease from 36% in the year-ago quarter.
Segment Results
American Express’ U.S. Consumer Services segment reported net income of $469 million in first-quarter 2017, plunging 32% year over year. Total revenue, net of interest expenses, declined 8% year over year to $3.3 billion. Notably, the year-ago period included Costco-related revenues, provisions and expenses.
International Consumer and Network Services’ net income amounted to $218 million, up 16% year over year. Total revenue, net of interest expenses, increased 5% year over year to $1.4 billion, primarily driven by higher Card Member spending.
Global Commercial Services’ net income of $418 million plummeted 14% year over year. Total revenue, net of interest expenses, increased 3% year over year to $2.5 billion, primarily reflecting higher Card Member spending. The company, however, expects this to remain a slower growth segment as it has not yet experienced an uptick in travel and entertainment spending by larger corporations.
Global Merchant Services’ net income inched up 2% year over year to $363 million in the reported quarter. Total revenue, net of interest expenses, was down 2% year over year to $1.1 billion. The prior-year quarter included Costco-related revenues.
Corporate and Other reported net loss of $231 million compared with net loss of $298 million in the year-ago quarter.
American Express' return on average common equity (ROCE) was 25.1% as of Mar 31 2017, up 150 basis points year over year.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been five upward revisions for the current quarter compared to one downward.
At this time, American Express' stock has a subpar Growth Score of 'D' and is also lagging on the momentum front with an 'F'. However, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is American Express (AXP) Down 4.6% Since the Last Earnings Report?
A month has gone by since the last earnings report for American Express Company (AXP - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? 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.
American Express Q1 Earnings Beat, 2017 View Intact
American Express' first-quarter adjusted earnings per share (EPS) of $1.34 beat the Zacks Consensus Estimate of $1.28 but declined 8% year over year.
Better-than-expected results were mainly backed by the company’s investments to grow its business coupled with cost control initiatives.
The company reaffirmed its earlier EPS guidance of $5.60–$5.80 for 2017.
Performance in Detail
Revenues of $7.9 billion came in ahead of the Zacks Consensus Estimate of $7.7 billion. However, revenues were down 2% year over year reflecting lower discount revenue and net interest income following the Costco portfolio sale in the second quarter of last year.
Notably, excluding Costco-related business and the effect of foreign exchange rates owing to the impact of a stronger U.S. dollar on international operations during the quarter, adjusted revenues climbed 7% driven by higher adjusted Card Member spending and adjusted net interest income.
American Express acquired 2.6 million new card users globally and “card member spending grew 8%.”
Provisions for losses totaled $573 million, up 32% year over year, reflecting higher loan growth, receivables and net write-offs.
Total expenses of $5.5 billion increased 1% year over year, led by higher rewards’ expenses as the company added new features to its products to woo customers.
Total operating costs during the quarter were down 3% year over year. The company continued to progress on its cost reduction initiatives and is on track to remove $1 billion from cost based on a run rate basis by the end of 2017.
The effective tax rate was 33%, reflecting a decrease from 36% in the year-ago quarter.
Segment Results
American Express’ U.S. Consumer Services segment reported net income of $469 million in first-quarter 2017, plunging 32% year over year. Total revenue, net of interest expenses, declined 8% year over year to $3.3 billion. Notably, the year-ago period included Costco-related revenues, provisions and expenses.
International Consumer and Network Services’ net income amounted to $218 million, up 16% year over year. Total revenue, net of interest expenses, increased 5% year over year to $1.4 billion, primarily driven by higher Card Member spending.
Global Commercial Services’ net income of $418 million plummeted 14% year over year. Total revenue, net of interest expenses, increased 3% year over year to $2.5 billion, primarily reflecting higher Card Member spending. The company, however, expects this to remain a slower growth segment as it has not yet experienced an uptick in travel and entertainment spending by larger corporations.
Global Merchant Services’ net income inched up 2% year over year to $363 million in the reported quarter. Total revenue, net of interest expenses, was down 2% year over year to $1.1 billion. The prior-year quarter included Costco-related revenues.
Corporate and Other reported net loss of $231 million compared with net loss of $298 million in the year-ago quarter.
American Express' return on average common equity (ROCE) was 25.1% as of Mar 31 2017, up 150 basis points year over year.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been five upward revisions for the current quarter compared to one downward.
American Express Company Price and Consensus
American Express Company Price and Consensus | American Express Company Quote
VGM Scores
At this time, American Express' stock has a subpar Growth Score of 'D' and is also lagging on the momentum front with an 'F'. However, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.