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What's in Store for American Express (AXP) in Q3 Earnings?

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American Express Co. (AXP - Free Report) is scheduled to report third-quarter 2021 results on Oct 22, before the opening bell.

The Zacks Consensus Estimate for the company’s third-quarter earnings and revenues is pegged at $1.77 per share and $10.56 billion, respectively, indicating a rise of 36.15% and 20.67% each from the corresponding year-earlier reported figures.

Factors to Impact Q3 Results

The year 2021 marks a transition phase for the company after suffering clutched consumer spending in 2020. Overall spending on American Express cards was consistent for the last four quarters, a trend that most likely continued in the to-be-reported quarter as well since restrictions were relaxed and consumer confidence received a boost.

Travel and Entertainment, which saw a decline due to COVID-19, is also staging a comeback, particularly in the United States as the vaccine rollout accelerates. The company’s revenues took a hit in the recent quarters as T&E receded because it contributes handsomely to the top line. With the unwinding of pent-up demand for consumer travel, spending in this category is expected to have driven total revenues.

Card acquisitions in some of the company’s largest travel co-brand portfolios have increased since the fourth quarter of 2020. This indicates that travel remains an attractive category for consumers.  

Thus, an increase in the overall spending level is likely to have inflated Discount revenues, the company’s largest revenue driver.   

Its net interest income, the second-largest revenue contributor, is likely to have risen on higher loan disbursements by the company. Recent data showed that consumer borrowing shot up as people became more confident about their ability to pay loans.

The third largest revenue catalyst, which is the net card fee, might have increased. The company is likely to have issued more cards in the to-be-reported quarter as consumers continue to shop and spend.
Its margins are expected to have been weighed down by investments made to rebuild growth momentum.

Earnings Surprise History

The company boasts an encouraging earnings surprise record. Its bottom line beat estimates in three of the last four quarters and missed the mark in the remaining one, the average surprise being 26.88%. This is depicted in the chart below:

American Express Company Price and EPS Surprise

American Express Company Price and EPS Surprise

American Express Company price-eps-surprise | American Express Company Quote

Here is what our quantitative model predicts:

Our proven model predicts an earnings beat for American Express this time around. The combination of a positive Earnings ESP  and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: American Express has an Earnings ESP of 3.45%.

Zacks Rank: American Express currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks to Consider

Some other stocks worth considering from the finance sector with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:

Discover Financial Services (DFS - Free Report) has an Earnings ESP of +2.25% and a Zacks Rank of 3, presently.

Synchrony Financial (SYF - Free Report) has an Earnings ESP of +3.74% and is Zacks #3 Ranked, currently.  

Capital One Financial Corporation (COF - Free Report) has an Earnings ESP of +11.55% and is a #3 Ranked player at present.