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Why Investors are Retaining American Express (AXP) Stock Now
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American Express Company (AXP - Free Report) is well-poised to grow on the back of continued business momentum, better volumes and higher card member spending. In the long term, the company foresees earnings growth in the mid-teens.
American Express — with a market cap of $118 billion — is a diversified financial services company, offering charge and credit payment card products, and travel-related services worldwide. Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
The Zacks Consensus Estimate for AXP’s 2023 earnings is pegged at $11.14 per share, indicating 13.1% year-over-year growth. The estimate has remained stable over the past week. American Express beat on earnings in two of the last four quarters and missed twice. This is depicted in the graph below.
The consensus mark for current-year revenues stands at $60.9 billion, suggesting a 15.2% rise from the prior-year reported number. In the long run, the company expects revenue growth of more than 10%.
Both Billed Business and Processed Volumes are expected to continue on their growth path in the future, boosting network volumes. Our estimate for total network volumes in 2023 indicates 11.5% year-over-year growth, signaling higher spending.
We expect cards in force for 2023 to jump 9% from a year ago, accompanied by a nearly 13% increase in the average fee per card. Global Merchant and Network Services, as well as the International Card Services segment, are expected to continue witnessing growth thanks to a rise in card member spending and growing network volumes.
AXP’s focus on small and medium-sized enterprises positions it well for long-term growth. It undertook a series of collaborations in a bid to solidify its digital capabilities and provide an efficient billing and payment process for clients. Deals with Envestnet | Yodlee, Bluechain and Plaid are helping the company in this regard.
Its moves like launching new products and expanding its presence in an existing market are noteworthy. This month, its subsidiary American Express Canada introduced the facility of tap to pay across the network of the public transit services provider, Toronto Transit Commission. This will help in expanding American Express’ network, address the everyday spending needs of its Cardmembers and boost its card-issuing business.
Key Risks
However, there are a few factors that investors should keep an eye on.
Rising expenses are lowering its margins. Last year, expenses jumped 24.1% year over year. We expect total expenses for 2023 to jump almost 12% year over year due to higher Card Member Rewards, Business Development costs, Data Processing and Equipment costs.
Also, American Express’ 12-month forward price-to-earnings multiple of 13.3X is higher than 11.8X of the industry, making it a little expensive at the current level. Nevertheless, we believe that a systematic and strategic plan of action will drive AXP’s growth in the long term.
The Zacks Consensus Estimate for WisdomTree’s 2023 earnings is pegged at 37 cents per share, indicating 42.3% year-over-year growth. Over the past 60 days, it has witnessed two upward estimate revisions against none in the opposite direction. Also, the consensus mark for WT’s revenues in 2023 suggests a 15.9% year-over-year rise.
The Zacks Consensus Estimate for Moody's 2023 earnings suggests 17.5% year-over-year growth. Over the past 60 days, it has witnessed nine upward estimate revisions against no downward movement. The consensus mark for MCO’s revenues in 2023 suggests a 9% year-over-year rise.
The Zacks Consensus Estimate for Globe Life’s 2023 bottom line indicates a 28.7% increase from the year-ago period. In the past 60 days, it witnessed five upward estimate revisions against none in the opposite direction. The consensus mark for GL’s revenues in 2023 suggests a 4% year-over-year gain.
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Why Investors are Retaining American Express (AXP) Stock Now
American Express Company (AXP - Free Report) is well-poised to grow on the back of continued business momentum, better volumes and higher card member spending. In the long term, the company foresees earnings growth in the mid-teens.
American Express — with a market cap of $118 billion — is a diversified financial services company, offering charge and credit payment card products, and travel-related services worldwide. Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
The Zacks Consensus Estimate for AXP’s 2023 earnings is pegged at $11.14 per share, indicating 13.1% year-over-year growth. The estimate has remained stable over the past week. American Express beat on earnings in two of the last four quarters and missed twice. This is depicted in the graph below.
American Express Company Price and EPS Surprise
American Express Company price-eps-surprise | American Express Company Quote
The consensus mark for current-year revenues stands at $60.9 billion, suggesting a 15.2% rise from the prior-year reported number. In the long run, the company expects revenue growth of more than 10%.
Both Billed Business and Processed Volumes are expected to continue on their growth path in the future, boosting network volumes. Our estimate for total network volumes in 2023 indicates 11.5% year-over-year growth, signaling higher spending.
We expect cards in force for 2023 to jump 9% from a year ago, accompanied by a nearly 13% increase in the average fee per card. Global Merchant and Network Services, as well as the International Card Services segment, are expected to continue witnessing growth thanks to a rise in card member spending and growing network volumes.
AXP’s focus on small and medium-sized enterprises positions it well for long-term growth. It undertook a series of collaborations in a bid to solidify its digital capabilities and provide an efficient billing and payment process for clients. Deals with Envestnet | Yodlee, Bluechain and Plaid are helping the company in this regard.
Its moves like launching new products and expanding its presence in an existing market are noteworthy. This month, its subsidiary American Express Canada introduced the facility of tap to pay across the network of the public transit services provider, Toronto Transit Commission. This will help in expanding American Express’ network, address the everyday spending needs of its Cardmembers and boost its card-issuing business.
Key Risks
However, there are a few factors that investors should keep an eye on.
Rising expenses are lowering its margins. Last year, expenses jumped 24.1% year over year. We expect total expenses for 2023 to jump almost 12% year over year due to higher Card Member Rewards, Business Development costs, Data Processing and Equipment costs.
Also, American Express’ 12-month forward price-to-earnings multiple of 13.3X is higher than 11.8X of the industry, making it a little expensive at the current level. Nevertheless, we believe that a systematic and strategic plan of action will drive AXP’s growth in the long term.
Key Picks
Some better-ranked stocks in the broader finance space are WisdomTree, Inc. (WT - Free Report) , Moody's Corporation (MCO - Free Report) and Globe Life Inc. (GL - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for WisdomTree’s 2023 earnings is pegged at 37 cents per share, indicating 42.3% year-over-year growth. Over the past 60 days, it has witnessed two upward estimate revisions against none in the opposite direction. Also, the consensus mark for WT’s revenues in 2023 suggests a 15.9% year-over-year rise.
The Zacks Consensus Estimate for Moody's 2023 earnings suggests 17.5% year-over-year growth. Over the past 60 days, it has witnessed nine upward estimate revisions against no downward movement. The consensus mark for MCO’s revenues in 2023 suggests a 9% year-over-year rise.
The Zacks Consensus Estimate for Globe Life’s 2023 bottom line indicates a 28.7% increase from the year-ago period. In the past 60 days, it witnessed five upward estimate revisions against none in the opposite direction. The consensus mark for GL’s revenues in 2023 suggests a 4% year-over-year gain.