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Will Higher Costs Affect American Express' (AXP) Q4 Earnings?
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American Express Company (AXP - Free Report) is set to report its fourth-quarter 2023 results on Jan 26, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for fourth-quarter earnings per share of $2.65 suggests a 28% increase from the prior-year figure of $2.07. The consensus mark remained stable over the past week. The consensus estimate for fourth-quarter revenues of $16 billion indicates a 13.1% jump from the year-ago reported figure.
American Express beat the consensus estimate for earnings in two of the trailing four quarters and missed twice, with the average surprise being 0.1%. This is depicted in the graph below:
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at AXP’s previous-quarter performance first.
Q3 Earnings Rewind
In the last reported quarter, the globally integrated payments company’s adjusted earnings per share of $3.30 beat the Zacks Consensus Estimate by 11.5%, thanks to continued business momentum, better volumes and higher card member spending. Increased compensation costs and higher operating and customer engagement costs partially offset the positives.
American Express is expected to have experienced strengthened network volumes in the fourth quarter, extending a trend observed over the past several quarters. This increase is likely attributable to increased total billed business and processed volumes. The Zacks Consensus Estimate for fourth-quarter total network volumes indicates 6.9% year-over-year growth from $413.3 billion.
Discount revenues, a significant revenue driver for AmEx, are likely to have been supported by a relatively resilient consumer spending level. The Zacks Consensus Estimate for fourth-quarter Discount revenues indicates 7.4% year-over-year growth.
In the fourth quarter, Travel and Entertainment (T&E) is anticipated to have sustained its growth trend, resulting in increased T&E-related spending. Further, fees, commissions and other revenues are expected to have improved, driven by an upturn in travel-related income. Also, the Zacks Consensus Estimate for fourth-quarter International Card Services pre-tax income is pegged at $146 million, a significant improvement from the year-ago period’s loss of $15 million.
Cards-in-force is likely to have witnessed an uptick in the quarter under review. The Zacks Consensus Estimate for fourth-quarter total cards-in-force indicates a 5.4% year-over-year increase. The consensus mark for the average fee per card indicates 15.8% year-over-year growth in the fourth quarter. The consensus estimate for average Worldwide Card Member Loans also implies 17.1% year-over-year growth.
AmEx’s interest income, the second-largest revenue contributor, is likely to have risen on higher loan disbursements. The Zacks Consensus Estimate for AXP’s interest income suggests an upside of almost 37.5% from the year-ago reported figure of almost $4 billion. Also, the consensus mark for Global Merchant and Network Services’ pre-tax income indicates a 22.2% year-over-year increase.
The factors mentioned above are expected to have positioned American Express for significant year-over-year growth. However, an increase in expenses, card member rewards, marketing and business development costs are likely to have dampened profit margins, somewhat offsetting the positive aspects.
Fourth-quarter client engagement costs are likely to have increased due to higher network volumes, along with rising compensation and service costs, making an earnings beat uncertain. The consensus estimate for average proprietary basic card member spending in commercial services indicates a 3.5% year-over-year decline. Also, a hefty provision for credit losses is likely to have impacted the results. We expect rainy-day funds to have significantly increased in the fourth quarter.
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 has an Earnings ESP of -0.86%. This is because the Most Accurate Estimate currently stands at $2.63 per share, lower than the Zacks Consensus Estimate of $2.65.
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 #2.
Stocks to Consider
While an earnings beat looks uncertain for American Express, here are some companies from the broader 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 Coinbase’s bottom line for the to-be-reported quarter suggests a 95.1% year-over-year improvement. The estimate improved by 7 cents over the past month. COIN beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 63%.
Chubb Limited (CB - Free Report) has an Earnings ESP of +0.60% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Chubb’s bottom line for the to-be-reported quarter indicates a 24.4% year-over-year increase. The estimate increased by 4 cents over the past week. Furthermore, the consensus mark for CB’s revenues is pegged at $12.9 billion, suggesting 10.2% growth from a year ago.
Brookfield Asset Management Ltd. (BAM - Free Report) has an Earnings ESP of +0.69% and a Zacks Rank of 3.
The Zacks Consensus Estimate for Brookfield Asset Management’s bottom line for the to-be-reported quarter indicates 9.7% growth from the year-ago period. BAM beat earnings estimates twice in the past four quarters and missed on the other two occasions, with an average surprise of 0.2%.
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Will Higher Costs Affect American Express' (AXP) Q4 Earnings?
American Express Company (AXP - Free Report) is set to report its fourth-quarter 2023 results on Jan 26, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for fourth-quarter earnings per share of $2.65 suggests a 28% increase from the prior-year figure of $2.07. The consensus mark remained stable over the past week. The consensus estimate for fourth-quarter revenues of $16 billion indicates a 13.1% jump from the year-ago reported figure.
American Express beat the consensus estimate for earnings in two of the trailing four quarters and missed twice, with the average surprise being 0.1%. This is depicted in the graph below:
American Express Company Price and EPS Surprise
American Express Company price-eps-surprise | American Express Company Quote
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at AXP’s previous-quarter performance first.
Q3 Earnings Rewind
In the last reported quarter, the globally integrated payments company’s adjusted earnings per share of $3.30 beat the Zacks Consensus Estimate by 11.5%, thanks to continued business momentum, better volumes and higher card member spending. Increased compensation costs and higher operating and customer engagement costs partially offset the positives.
Now, let’s see how things have shaped up before the fourth-quarter earnings announcement.
Q4 Factors to Note
American Express is expected to have experienced strengthened network volumes in the fourth quarter, extending a trend observed over the past several quarters. This increase is likely attributable to increased total billed business and processed volumes. The Zacks Consensus Estimate for fourth-quarter total network volumes indicates 6.9% year-over-year growth from $413.3 billion.
Discount revenues, a significant revenue driver for AmEx, are likely to have been supported by a relatively resilient consumer spending level. The Zacks Consensus Estimate for fourth-quarter Discount revenues indicates 7.4% year-over-year growth.
In the fourth quarter, Travel and Entertainment (T&E) is anticipated to have sustained its growth trend, resulting in increased T&E-related spending. Further, fees, commissions and other revenues are expected to have improved, driven by an upturn in travel-related income. Also, the Zacks Consensus Estimate for fourth-quarter International Card Services pre-tax income is pegged at $146 million, a significant improvement from the year-ago period’s loss of $15 million.
Cards-in-force is likely to have witnessed an uptick in the quarter under review. The Zacks Consensus Estimate for fourth-quarter total cards-in-force indicates a 5.4% year-over-year increase. The consensus mark for the average fee per card indicates 15.8% year-over-year growth in the fourth quarter. The consensus estimate for average Worldwide Card Member Loans also implies 17.1% year-over-year growth.
AmEx’s interest income, the second-largest revenue contributor, is likely to have risen on higher loan disbursements. The Zacks Consensus Estimate for AXP’s interest income suggests an upside of almost 37.5% from the year-ago reported figure of almost $4 billion. Also, the consensus mark for Global Merchant and Network Services’ pre-tax income indicates a 22.2% year-over-year increase.
The factors mentioned above are expected to have positioned American Express for significant year-over-year growth. However, an increase in expenses, card member rewards, marketing and business development costs are likely to have dampened profit margins, somewhat offsetting the positive aspects.
Fourth-quarter client engagement costs are likely to have increased due to higher network volumes, along with rising compensation and service costs, making an earnings beat uncertain. The consensus estimate for average proprietary basic card member spending in commercial services indicates a 3.5% year-over-year decline. Also, a hefty provision for credit losses is likely to have impacted the results. We expect rainy-day funds to have significantly increased in the fourth quarter.
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 has an Earnings ESP of -0.86%. This is because the Most Accurate Estimate currently stands at $2.63 per share, lower than the Zacks Consensus Estimate of $2.65.
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 #2.
Stocks to Consider
While an earnings beat looks uncertain for American Express, here are some companies from the broader 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:
Coinbase Global, Inc. (COIN - Free Report) has an Earnings ESP of +160.61% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Coinbase’s bottom line for the to-be-reported quarter suggests a 95.1% year-over-year improvement. The estimate improved by 7 cents over the past month. COIN beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 63%.
Chubb Limited (CB - Free Report) has an Earnings ESP of +0.60% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Chubb’s bottom line for the to-be-reported quarter indicates a 24.4% year-over-year increase. The estimate increased by 4 cents over the past week. Furthermore, the consensus mark for CB’s revenues is pegged at $12.9 billion, suggesting 10.2% growth from a year ago.
Brookfield Asset Management Ltd. (BAM - Free Report) has an Earnings ESP of +0.69% and a Zacks Rank of 3.
The Zacks Consensus Estimate for Brookfield Asset Management’s bottom line for the to-be-reported quarter indicates 9.7% growth from the year-ago period. BAM beat earnings estimates twice in the past four quarters and missed on the other two occasions, with an average surprise of 0.2%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.