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Why Is American Express (AXP) Up 1.8% Since the Last Earnings Report?
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More than a month has gone by since the last earnings report for American Express Company (AXP - Free Report) . Shares have added about 1.8% in the past month, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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 drivers.
American Express Q3 Earnings Beat Estimates
American Express Company reported adjusted earnings per share (EPS) of $1.50, beating the Zacks Consensus Estimate by 2%. Earnings witnessed a sharp 21% year-over-year improvement.
Better-than-expected results were mainly backed by increase in net interest income, higher Card spending at lower tax rate and the effect of share buyback. The company continues to witness strong loan growth and credit metrics, plus lower operating costs.
Delving Deeper
Revenues came in at $8.4 billion, 1.5% ahead of the Zacks Consensus Estimate of $8.3 billion. Top line increased 8.5% year over year on higher net interest income and Card Member spending. However, lower discount rate limited the upside.
Provisions for losses totaled $769 million, up 53% year over year and attributable to growth in the loan portfolio besides an expected escalation in the lending write-off and delinquency rates.
Total expenses of $5.8 billion rose 6% year over year due to higher rewards’ expenses for adding new features to the company’s products and higher Card Member spending. However, marketing costs decreased.
The effective tax rate was 26%, reflecting a fall from 34% in the year-ago quarter. The tax rate declined owing to realization of certain foreign tax credits in the current year and the geographic mix of earnings. Adjusted operating expenses reduced 4% year over year to $2.6 billion.
Segment Results
American Express’ U.S. Consumer Services segment reported net income of $475 million, up 18% year over year. Total revenue, net of interest expense of $3.3 billion was up 13% year over year, reflecting higher net interest income and Card Member spending.
International Consumer and Network Services’ net income amounted to $286 million, up 85% year over year. Total revenue, net of interest expenses, climbed 7% year over year to $1.5 billion, primarily on the back of higher Card Member spending and net interest income.
Global Commercial Services’ net income of $529 million rallied 14% year over year. Total revenue, net of interest expenses, rose 6% year over year to $2.6 billion, primarily reflecting higher Card Member spending.
Global Merchant Services’ net income inched up 3% year over year to $368 million in the reported quarter. Total revenue, net of interest expenses, increased 4% year over year at $1.2 billion on higher Card Member spending, partially offset by a lower discount rate.
Corporate and Other reported net loss of $302 million compared unfavorably with the net loss of $239 million in the year-ago quarter.
Guides Higher
The company guided its 2017 earnings per share higher to a range of $5.80–$5.90 from earlier guidance of $5.60–$5.80 to account for continued strength in business.
Recent Developments
American Express announced that its CEO Kenneth Chenault will step down from his post in February next year after completing nearly a long 17-year term.
How Have Estimates Been Moving Since then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
Currently, American Express's stock has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions 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) Up 1.8% Since the Last Earnings Report?
More than a month has gone by since the last earnings report for American Express Company (AXP - Free Report) . Shares have added about 1.8% in the past month, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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 drivers.
American Express Q3 Earnings Beat Estimates
American Express Company reported adjusted earnings per share (EPS) of $1.50, beating the Zacks Consensus Estimate by 2%. Earnings witnessed a sharp 21% year-over-year improvement.
Better-than-expected results were mainly backed by increase in net interest income, higher Card spending at lower tax rate and the effect of share buyback. The company continues to witness strong loan growth and credit metrics, plus lower operating costs.
Delving Deeper
Revenues came in at $8.4 billion, 1.5% ahead of the Zacks Consensus Estimate of $8.3 billion. Top line increased 8.5% year over year on higher net interest income and Card Member spending. However, lower discount rate limited the upside.
Provisions for losses totaled $769 million, up 53% year over year and attributable to growth in the loan portfolio besides an expected escalation in the lending write-off and delinquency rates.
Total expenses of $5.8 billion rose 6% year over year due to higher rewards’ expenses for adding new features to the company’s products and higher Card Member spending. However, marketing costs decreased.
The effective tax rate was 26%, reflecting a fall from 34% in the year-ago quarter. The tax rate declined owing to realization of certain foreign tax credits in the current year and the geographic mix of earnings.
Adjusted operating expenses reduced 4% year over year to $2.6 billion.
Segment Results
American Express’ U.S. Consumer Services segment reported net income of $475 million, up 18% year over year. Total revenue, net of interest expense of $3.3 billion was up 13% year over year, reflecting higher net interest income and Card Member spending.
International Consumer and Network Services’ net income amounted to $286 million, up 85% year over year. Total revenue, net of interest expenses, climbed 7% year over year to $1.5 billion, primarily on the back of higher Card Member spending and net interest income.
Global Commercial Services’ net income of $529 million rallied 14% year over year. Total revenue, net of interest expenses, rose 6% year over year to $2.6 billion, primarily reflecting higher Card Member spending.
Global Merchant Services’ net income inched up 3% year over year to $368 million in the reported quarter. Total revenue, net of interest expenses, increased 4% year over year at $1.2 billion on higher Card Member spending, partially offset by a lower discount rate.
Corporate and Other reported net loss of $302 million compared unfavorably with the net loss of $239 million in the year-ago quarter.
Guides Higher
The company guided its 2017 earnings per share higher to a range of $5.80–$5.90 from earlier guidance of $5.60–$5.80 to account for continued strength in business.
Recent Developments
American Express announced that its CEO Kenneth Chenault will step down from his post in February next year after completing nearly a long 17-year term.
How Have Estimates Been Moving Since then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
American Express Company Price and Consensus
American Express Company Price and Consensus | American Express Company Quote
VGM Scores
Currently, American Express's stock has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions 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.