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Can Rising Costs Play Spoilsport for AmEx (AXP) Q1 Earnings?
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American Express Company (AXP - Free Report) is set to report first-quarter 2022 results on Apr 22, before the opening bell.
The financial services company reported an adjusted earnings of $2.18 per share for the fourth quarter, beating the Zacks Consensus Estimate of $1.78 on the back of higher Card Member spending that reached record highs and growing network volumes. The results were supported by improved performance from Global Commercial Services and Global Merchant and Network Services units. Its prudent investment strategy helped it boost new Card acquisitions, increase loan balances and enhance digital engagement with clients.
The Zacks Consensus Estimate for first-quarter earnings per share of $2.43 suggests an 11.3% decrease from the prior-year figure of $2.74. Three upward estimate revisions have been witnessed by the company in the past 30 days versus two in the opposite direction. The consensus estimate for first-quarter revenues of $11.7 billion indicates a 28.9% increase from the year-ago reported figure.
American Express beat the consensus estimate for earnings in each of the prior four quarters, with the average being 46%. This is depicted in the graph below:
American Express is likely to have witnessed improved volumes in the to-be-reported quarter, a trend that has been continuing for the last few quarters. Volumes of AXP are likely to have expanded owing to total network volumes and billed business volumes. A rise in the overall spending level is likely to have inflated Discount revenues, AXP’s largest revenue driver.
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. T&E is expected to have increased in the first quarter of 2022. Fees and commissions, and other revenues might have improved on the back of an uptick in travel-related revenues. The consensus mark for Revenue-other suggests an upside of 35.2% from the year-ago reported figure. Card acquisitions in some of AXP’s largest travel co-brand portfolios are likely to have increased. This reflects that travel remains an attractive category for consumers.
American Express’ net interest income, the second-largest revenue contributor, is likely to have risen on higher loan disbursements. The consensus mark for AXP’s net interest income suggests an upside of 19.6% from the year-ago reported figure.
While the above-mentioned factors are likely to have aided the company’s bottom line in the first quarter, the rising expenses might have offset the positives. The Zacks Consensus Estimate for total expenses in global commercial services indicates a 21.1% year-over-year rise. Similarly, the consensus mark for marketing and business development costs indicates a 29.8% year-over-year increase. Hence, the significant increase in costs is not only expected to have positioned AXP for a year-over-year decrease in profits but also makes an earnings beat uncertain.
Earnings Whispers
Our proven model does not conclusively predict 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. That is not the case here, as you will see below.
Earnings ESP: The company’s Earnings ESP is -1.98%. This is because the Most Accurate Estimate currently stands at $2.39 per share, lower than the Zacks Consensus Estimate of $2.43.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: American Express currently carries a Zacks Rank #3.
Stocks to Consider
While earnings beat looks uncertain for American Express, here are some companies from the Finance space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Zacks Consensus Estimate for ProAssurance’s bottom line for the to-be-reported quarter indicates an improvement of 325% from the prior-year period. PRA witnessed one upward estimate revision in the past 30 days versus none in the opposite direction.
Centerspace (CSR - Free Report) has an Earnings ESP of +2.51% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for Centerspace’s earnings per share for the to-be-reported quarter is pegged at $1.06, implying an 11.6% improvement from the year-ago figure of 95 cents. CSR witnessed one upward estimate revision in the past 30 days versus none in the opposite direction.
SouthState Corporation (SSB - Free Report) has an Earnings ESP of +1.97% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for SouthState’s bottom line for the to-be-reported quarter has improved 4.8% in the past 30 days. SSB beat earnings estimates in each of the last four quarters, with an average of 24.7%.
Image: Shutterstock
Can Rising Costs Play Spoilsport for AmEx (AXP) Q1 Earnings?
American Express Company (AXP - Free Report) is set to report first-quarter 2022 results on Apr 22, before the opening bell.
The financial services company reported an adjusted earnings of $2.18 per share for the fourth quarter, beating the Zacks Consensus Estimate of $1.78 on the back of higher Card Member spending that reached record highs and growing network volumes. The results were supported by improved performance from Global Commercial Services and Global Merchant and Network Services units. Its prudent investment strategy helped it boost new Card acquisitions, increase loan balances and enhance digital engagement with clients.
Let’s see how things have shaped up prior to the first-quarter earnings announcement.
Trend in Estimate Revision
The Zacks Consensus Estimate for first-quarter earnings per share of $2.43 suggests an 11.3% decrease from the prior-year figure of $2.74. Three upward estimate revisions have been witnessed by the company in the past 30 days versus two in the opposite direction. The consensus estimate for first-quarter revenues of $11.7 billion indicates a 28.9% increase from the year-ago reported figure.
American Express beat the consensus estimate for earnings in each of the prior four quarters, with the average being 46%. This is depicted in the graph below:
American Express Company Price and EPS Surprise
American Express Company price-eps-surprise | American Express Company Quote
Factors to Note
American Express is likely to have witnessed improved volumes in the to-be-reported quarter, a trend that has been continuing for the last few quarters. Volumes of AXP are likely to have expanded owing to total network volumes and billed business volumes. A rise in the overall spending level is likely to have inflated Discount revenues, AXP’s largest revenue driver.
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. T&E is expected to have increased in the first quarter of 2022. Fees and commissions, and other revenues might have improved on the back of an uptick in travel-related revenues. The consensus mark for Revenue-other suggests an upside of 35.2% from the year-ago reported figure. Card acquisitions in some of AXP’s largest travel co-brand portfolios are likely to have increased. This reflects that travel remains an attractive category for consumers.
American Express’ net interest income, the second-largest revenue contributor, is likely to have risen on higher loan disbursements. The consensus mark for AXP’s net interest income suggests an upside of 19.6% from the year-ago reported figure.
While the above-mentioned factors are likely to have aided the company’s bottom line in the first quarter, the rising expenses might have offset the positives. The Zacks Consensus Estimate for total expenses in global commercial services indicates a 21.1% year-over-year rise. Similarly, the consensus mark for marketing and business development costs indicates a 29.8% year-over-year increase. Hence, the significant increase in costs is not only expected to have positioned AXP for a year-over-year decrease in profits but also makes an earnings beat uncertain.
Earnings Whispers
Our proven model does not conclusively predict 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. That is not the case here, as you will see below.
Earnings ESP: The company’s Earnings ESP is -1.98%. This is because the Most Accurate Estimate currently stands at $2.39 per share, lower than the Zacks Consensus Estimate of $2.43.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: American Express currently carries a Zacks Rank #3.
Stocks to Consider
While earnings beat looks uncertain for American Express, here are some companies from the Finance space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
ProAssurance Corporation (PRA - Free Report) has an Earnings ESP of +27.54% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ProAssurance’s bottom line for the to-be-reported quarter indicates an improvement of 325% from the prior-year period. PRA witnessed one upward estimate revision in the past 30 days versus none in the opposite direction.
Centerspace (CSR - Free Report) has an Earnings ESP of +2.51% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for Centerspace’s earnings per share for the to-be-reported quarter is pegged at $1.06, implying an 11.6% improvement from the year-ago figure of 95 cents. CSR witnessed one upward estimate revision in the past 30 days versus none in the opposite direction.
SouthState Corporation (SSB - Free Report) has an Earnings ESP of +1.97% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for SouthState’s bottom line for the to-be-reported quarter has improved 4.8% in the past 30 days. SSB beat earnings estimates in each of the last four quarters, with an average of 24.7%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.