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American Express (AXP) Up 3.9% Since Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for American Express Company (AXP - Free Report) . Shares have added about 3.9% in that time frame, 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 Q4 Earnings Lag, 2017 View Raised
American Express Company reported fourth-quarter 2016 adjusted EPS of $0.91, missing the Zacks Consensus Estimate of $0.98.
Net income attributable to common shareholders came in at $825 million or $0.88 per share in the reported quarter, down from $899 million or $0.89 per share in the prior-year quarter.
Lower-than-expected results were mainly due to higher provisions and substantial increase in marketing and promotion expenses. Also, results were hurt by the loss of the partnership with Costco Wholesale Corp. However, on a positive note, adjusted revenues increased.
For full-year 2016, the company’s adjusted EPS of $5.93 beat the Zacks Consensus Estimate of $5.75. Net income attributable to common shareholders was $5.41 billion or $5.65 per share, up from $5.16 billion or $5.05 per share in the prior year.
Notably, the company expects EPS for 2017 in the range of $5.60–$5.80. This reflects an increase from its prior guidance of at least $5.60.
Performance in Detail
American Express reported revenues of $32.12 billion for full-year 2016, surpassing the Zacks Consensus Estimate of $32.04 billion. However, revenues declined 2% year over year.
For fourth-quarter 2016, revenues of $8.02 billion came ahead of the Zacks Consensus Estimate of $7.94 billion. However, revenues were down 4% year over year, due to a decline in both non-interest income as well as net interest income.
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 6%, driven by higher adjusted card member spending and adjusted net interest income.
American Express' card billed business was $263.2 billion, down 4% year over year. Cards used worldwide declined 7% year over year to 109.9 billion.
Provisions for losses totaled $625 million, up 9% year over year. Adjusted provisions for losses climbed 20%, mainly reflecting higher loan growth and a small increase in both lending delinquency and net write-off rates.
Total expenses of $6.24 billion dipped 2% year over year. Though card member rewards, professional service and other expense declined, the reported quarter includes significant rise in investment spending on the company’s growth initiatives and a restructuring charge.
The effective tax rate was 29%, decreasing from 38% in the year-ago quarter.
Segment Results
American Express’ U.S. Consumer Services segment reported net income of $351 million in fourth-quarter 2016, plunging 35% year over year. Total revenue, net of interest expenses, declined 10% year over year to $3.03 billion. Notably, the year-ago period included Costco-related revenues, provisions and expenses.
International Consumer and Network Services’ net income amounted to $84 million, slumping 40% year over year, mainly due to increased investment spending on growth initiatives. Total revenue, net of interest expenses, increased 2% year over year to $1.38 billion, primarily driven by higher Card Member spending.
Global Commercial Services’ net income of $382 million declined 22% year over year. Total revenue, net of interest expenses, was up 1% year over year to $2.49 billion.
Global Merchant Services’ net income inched up 1% year over year to $369 million in the reported quarter. Total revenue, net of interest expenses, was down 7% year over year to $1.12 billion. The prior-year quarter included Costco-related revenues.
Corporate and Other reported net loss of $361 million compared with net loss of $633 million in the year-ago quarter.
Financial Update
As of Dec 31, 2016, American Express’ total assets were down 1% year over year to $159 billion, while long-term debt decreased 2% year over year to $47 billion. At the quarter end, card member receivables and loans (net of reserves) were $47 billion and $64 billion, respectively, reflecting a rise of 7% and 10% on a year-over-year basis.
The company held cash and cash equivalents of $25 billion, up 9% year over year. Shareholders' equity of $21 billion remained unchanged year over year.
American Express' return on average common equity (ROCE) was 27.5% as of Dec 31, 2016, up from 25.2% as of Dec 31, 2015.
How Have Estimates Been Moving Since Then?
Following the release, there has been one revision higher for the current quarter compared to one lower.
At this time, American Express' stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
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American Express (AXP) Up 3.9% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for American Express Company (AXP - Free Report) . Shares have added about 3.9% in that time frame, 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 Q4 Earnings Lag, 2017 View Raised
American Express Company reported fourth-quarter 2016 adjusted EPS of $0.91, missing the Zacks Consensus Estimate of $0.98.
Net income attributable to common shareholders came in at $825 million or $0.88 per share in the reported quarter, down from $899 million or $0.89 per share in the prior-year quarter.
Lower-than-expected results were mainly due to higher provisions and substantial increase in marketing and promotion expenses. Also, results were hurt by the loss of the partnership with Costco Wholesale Corp. However, on a positive note, adjusted revenues increased.
For full-year 2016, the company’s adjusted EPS of $5.93 beat the Zacks Consensus Estimate of $5.75. Net income attributable to common shareholders was $5.41 billion or $5.65 per share, up from $5.16 billion or $5.05 per share in the prior year.
Notably, the company expects EPS for 2017 in the range of $5.60–$5.80. This reflects an increase from its prior guidance of at least $5.60.
Performance in Detail
American Express reported revenues of $32.12 billion for full-year 2016, surpassing the Zacks Consensus Estimate of $32.04 billion. However, revenues declined 2% year over year.
For fourth-quarter 2016, revenues of $8.02 billion came ahead of the Zacks Consensus Estimate of $7.94 billion. However, revenues were down 4% year over year, due to a decline in both non-interest income as well as net interest income.
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 6%, driven by higher adjusted card member spending and adjusted net interest income.
American Express' card billed business was $263.2 billion, down 4% year over year. Cards used worldwide declined 7% year over year to 109.9 billion.
Provisions for losses totaled $625 million, up 9% year over year. Adjusted provisions for losses climbed 20%, mainly reflecting higher loan growth and a small increase in both lending delinquency and net write-off rates.
Total expenses of $6.24 billion dipped 2% year over year. Though card member rewards, professional service and other expense declined, the reported quarter includes significant rise in investment spending on the company’s growth initiatives and a restructuring charge.
The effective tax rate was 29%, decreasing from 38% in the year-ago quarter.
Segment Results
American Express’ U.S. Consumer Services segment reported net income of $351 million in fourth-quarter 2016, plunging 35% year over year. Total revenue, net of interest expenses, declined 10% year over year to $3.03 billion. Notably, the year-ago period included Costco-related revenues, provisions and expenses.
International Consumer and Network Services’ net income amounted to $84 million, slumping 40% year over year, mainly due to increased investment spending on growth initiatives. Total revenue, net of interest expenses, increased 2% year over year to $1.38 billion, primarily driven by higher Card Member spending.
Global Commercial Services’ net income of $382 million declined 22% year over year. Total revenue, net of interest expenses, was up 1% year over year to $2.49 billion.
Global Merchant Services’ net income inched up 1% year over year to $369 million in the reported quarter. Total revenue, net of interest expenses, was down 7% year over year to $1.12 billion. The prior-year quarter included Costco-related revenues.
Corporate and Other reported net loss of $361 million compared with net loss of $633 million in the year-ago quarter.
Financial Update
As of Dec 31, 2016, American Express’ total assets were down 1% year over year to $159 billion, while long-term debt decreased 2% year over year to $47 billion. At the quarter end, card member receivables and loans (net of reserves) were $47 billion and $64 billion, respectively, reflecting a rise of 7% and 10% on a year-over-year basis.
The company held cash and cash equivalents of $25 billion, up 9% year over year. Shareholders' equity of $21 billion remained unchanged year over year.
American Express' return on average common equity (ROCE) was 27.5% as of Dec 31, 2016, up from 25.2% as of Dec 31, 2015.
How Have Estimates Been Moving Since Then?
Following the release, there has been one revision higher for the current quarter compared to one lower.
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 strong Growth Score of 'A', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.