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American Express (AXP): What's in Store for Q2 Earnings?

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Global electronic payment processor American Express Co. (AXP - Free Report) or AmEx is scheduled to release second-quarter 2015 financial results after the closing bell on Jul 22.

In the last reported quarter, the company delivered a positive earnings surprise of 8.03%. The four-quarter trailing average beat is 4.2%, with positive surprises in all four quarters. Let us see how things are shaping up for this announcement.

Factors at Play

AmEx’s second-quarter results might suffer from a rise in expenses, loan loss provisions, foreign currency fluctuation and a stressed discount rate in Europe.  Moreover, since charge-offs and delinquencies are likely to start increasing in 2015 from their historical lows, some ripple effects of these laggards may be felt in the second quarter as well.

In addition, the adverse impact of the low interest rate environment may restrict returns from investment securities and growth from loan fee income and bank deposits. Nevertheless, AmEx’s spend-centric business model, strategic initiatives in the digital payments space and new card-issuing alliances should support the results. An intelligent capital management is also expected to help the bottom line. It will be interesting to see whether these positives manage to drive up an earnings beat.

Earnings Whispers

Our proven model does not conclusively show that AmEx is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here:

Zacks ESP: The Most Accurate estimate of $1.33 per share is on par with the Zacks Consensus Estimate of AmEx. Hence, the Earnings ESP is 0.00%.

Zacks Rank: AmEx has a Zacks Rank #3, which increases the predictive power of ESP. However, we need a positive ESP to be confident about an earnings beat. The combination of AmEx’s Zacks Rank #3 and 0.00% ESP deters us from making a conclusive prediction.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Euronet Worldwide, Inc. (EEFT - Free Report) has an Earnings ESP of +14.7% and a Zacks Rank #1.

On Deck Capital, Inc. (ONDK - Free Report) has an Earnings ESP of +500% and a Zacks Rank #3.

Global Payments Inc. (GPN - Free Report) has an Earnings ESP of +2.54% and a Zacks Rank #2.

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