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American Express (AXP) Up 7.4% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for American Express (AXP - Free Report) . Shares have added about 7.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is American Express 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 catalysts.
American Express Q3 Earnings Miss Estimates
American Express’ third-quarter 2020 earnings of 1.30 per share, missed the Zacks Consensus Estimate by 6.5%. Also, the bottom line plunged 38% year over year.
Earnings in the third quarter took a hit from weak spending volumes as a result of the adverse COVID-19 impact.
Even though total revenues of $8.75 billion beat the Zacks Consensus Estimate by 1.2%, the same declined 20% year over year. The top line was affected by a drop in Card Member spending and lower average discount rate.
Meanwhile, total expenses of $6.7 billion decreased 14% year over year owing to lower customer engagement costs on the back of limited Card Member spending as well as controlled usage of travel-related Card Member benefits.
Total provision of $665 million was down 24% year over year due to a modest reserve release and lower net write-offs.
Return on equity of 15.9% declined 1730 basis points year over year.
American Express’ Global Consumer Services segment reported net income of $855 million, down 13.7% year over year. Total revenues, net of interest expenses of $5.2 billion decreased 16% year over year, reflecting a fall in Card Member spending and loan volumes.
Global Commercial Services reported net income of $220 million, down 61.3% year over year. Total revenues, net of interest expenses, were $2.5 billion. This, in turn, plunged 23% year over year, mirroring a decline in Card Member spending and a lower average discount rate.
Global Merchant and Network Services’ net income plummeted 49.7% year over year to $263 million in the reported quarter. Total revenues and net of interest expenses were down 27% year over year to $1.1 billion.
Strong Financial Position (as of Sep 30, 2020)
Cash and cash equivalents were $33 billion, up 38% year over year. Total long-term debt of $45 billion was down 22% year over year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -11.41% due to these changes.
VGM Scores
Currently, American Express has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Outlook
Estimates have been trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, American Express has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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American Express (AXP) Up 7.4% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for American Express (AXP - Free Report) . Shares have added about 7.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is American Express 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 catalysts.
American Express Q3 Earnings Miss Estimates
American Express’ third-quarter 2020 earnings of 1.30 per share, missed the Zacks Consensus Estimate by 6.5%. Also, the bottom line plunged 38% year over year.
Earnings in the third quarter took a hit from weak spending volumes as a result of the adverse COVID-19 impact.
Even though total revenues of $8.75 billion beat the Zacks Consensus Estimate by 1.2%, the same declined 20% year over year. The top line was affected by a drop in Card Member spending and lower average discount rate.
Meanwhile, total expenses of $6.7 billion decreased 14% year over year owing to lower customer engagement costs on the back of limited Card Member spending as well as controlled usage of travel-related Card Member benefits.
Total provision of $665 million was down 24% year over year due to a modest reserve release and lower net write-offs.
Return on equity of 15.9% declined 1730 basis points year over year.
American Express’ Global Consumer Services segment reported net income of $855 million, down 13.7% year over year. Total revenues, net of interest expenses of $5.2 billion decreased 16% year over year, reflecting a fall in Card Member spending and loan volumes.
Global Commercial Services reported net income of $220 million, down 61.3% year over year. Total revenues, net of interest expenses, were $2.5 billion. This, in turn, plunged 23% year over year, mirroring a decline in Card Member spending and a lower average discount rate.
Global Merchant and Network Services’ net income plummeted 49.7% year over year to $263 million in the reported quarter. Total revenues and net of interest expenses were down 27% year over year to $1.1 billion.
Strong Financial Position (as of Sep 30, 2020)
Cash and cash equivalents were $33 billion, up 38% year over year. Total long-term debt of $45 billion was down 22% year over year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -11.41% due to these changes.
VGM Scores
Currently, American Express has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Outlook
Estimates have been trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, American Express has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.