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Here's Why You Should Invest in American Express (AXP) Stock
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American Express Company (AXP - Free Report) is in a favorable position for growth, driven by an upswing in card member spending, increasing volumes, robust new account acquisitions and sustained business momentum. The resilience witnessed in consumer spending during recent times, despite macroeconomic uncertainties, inflation and a high interest rate environment, is expected to contribute positively to its performance.
American Express — with a market cap of $159.6 billion — is a diversified financial services company offering charge and credit payment card products and travel-related services worldwide. Courtesy of solid prospects, this Zacks Rank #2 (Buy) stock is an attractive investment opportunity now.
Let’s delve deeper.
The Zacks Consensus Estimate for AXP’s 2024 earnings per share (EPS) is pegged at $12.82, indicating 14.4% year-over-year growth. The company expects EPS in the range of $12.65-$13.15 in 2024. In the long term, the company foresees earnings growth in the mid-teens. American Express beat on earnings in two of the last four quarters and missed twice, with an average surprise of 1.1%. This is depicted in the graph below.
The consensus mark for current-year revenues stands at $66.2 billion, suggesting a 9.4% rise from the prior-year reported number. AXP expects total revenues to grow at around 9-11% year over year in 2024. Looking ahead, the company anticipates a continuous revenue growth trajectory, targeting more than 10% in the long run.
Both Billed Business and Processed Volumes are poised for sustained growth, contributing to the overall expansion of network volumes. This will play a major role in top-line growth. Growth in goods and services, travel and entertainment spending should fuel growth in the future. As consumer spending is proving to be resilient despite rising inflation, demand for travel and dining experiences is expected to be on the uprise, benefiting AXP’s top line. Growing U.S. consumer billings are expected to drive billing revenues for AXP. The number of transactions from AXP’s card members continues to rise in double digits year over year, and good customer engagement poises this metric to increase in the future.
The International Card Services segment, as well as the Global Merchant and Network Services unit, are expected to continue witnessing growth, driven by an increase in card member spending and growing network volumes, respectively. Card fees are expected to witness growth, supported by AXP’s new card acquisitions.
The emphasis on small and medium-sized enterprises positions AmEx for sustained long-term growth. It partnered with American Express Global Business Travel, to aid them in managing expenses efficiently. This move bodes well for its Commercial Services segment. The acquisition of Kabbage is anticipated to play a crucial role in this strategy. Additionally, AXP actively engages in partnerships and collaborations to strengthen its digital capabilities, aiming to deliver efficient billing, payment processes and other services for its clients. The company recently partnered with POINT.ME in a bid to ease the booking of flights using points earned by the Card Members from AXP’s Membership Rewards program. AXP also streamlined its operations with the sale of Accertify to Accel-KKR.
American Express' robust return on equity of 31% (compared with the industry average of 19.8%) serves as a key indicator of its growth potential. It underscores the company's strategic prowess in effectively deploying shareholders' funds and highlights its financial strength.
Closing the fourth quarter, the company reported a robust financial position, with cash & cash equivalents standing at $47 billion, marking a significant increase from the $34 billion recorded at the end of 2022. Simultaneously, short-term borrowings remained manageable at $1 billion.
In 2023, AXP allocated $3.5 billion to share buybacks and distributed common stock dividends of $1.8 billion. The company also hiked its quarterly dividend by 17% to 70 cents per share in the first quarter of 2024. This underscores the company's dedication to enhancing shareholder returns.
Key Risks
However, there are a few factors that investors should keep an eye on.
Escalating expenses are exerting downward pressure on its margins. Last year, expenses jumped 10% year over year. The company expects variable customer engagement expenses to grow slightly higher than its revenues in 2024. AXP expects total expenses to increase in mid to high-level digits for 2024.
Also, American Express’ 12-month forward price-to-earnings multiple of 16.7X is higher than 13.1X of the industry. This valuation indicates a slightly higher expense relative to industry peers 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 bottom line of First Internet Bancorp outpaced estimates in three of the last four quarters and matched the mark once, the average surprise being 30.6%. The Zacks Consensus Estimate for INBK’s 2024 earnings suggests a surge of 64.5% from the year-ago reported figure, while the same for revenues suggests growth of 22.6%. The consensus mark for INBK’s 2024 earnings has moved 24.9% north in the past 60 days.
Coinbase has a decent track record of beating earnings estimates in each of the last four quarters, the average being 377.6%. The Zacks Consensus Estimate for COIN’s 2024 earnings per share indicates a year-over-year increase of 313.5%.
Affiliated Managers’ earnings outpaced estimates in each of the trailing four quarters, the average surprise being 7.1%. The Zacks Consensus Estimate for AMG’s 2024 earnings suggests an improvement of 10% from the year-ago reported figure, while the same for revenues suggests growth of 4%. The consensus mark for AMG’s 2024 earnings has moved 1.1% north in the past 30 days.
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Here's Why You Should Invest in American Express (AXP) Stock
American Express Company (AXP - Free Report) is in a favorable position for growth, driven by an upswing in card member spending, increasing volumes, robust new account acquisitions and sustained business momentum. The resilience witnessed in consumer spending during recent times, despite macroeconomic uncertainties, inflation and a high interest rate environment, is expected to contribute positively to its performance.
American Express — with a market cap of $159.6 billion — is a diversified financial services company offering charge and credit payment card products and travel-related services worldwide. Courtesy of solid prospects, this Zacks Rank #2 (Buy) stock is an attractive investment opportunity now.
Let’s delve deeper.
The Zacks Consensus Estimate for AXP’s 2024 earnings per share (EPS) is pegged at $12.82, indicating 14.4% year-over-year growth. The company expects EPS in the range of $12.65-$13.15 in 2024. In the long term, the company foresees earnings growth in the mid-teens. American Express beat on earnings in two of the last four quarters and missed twice, with an average surprise of 1.1%. This is depicted in the graph below.
American Express Company Price and EPS Surprise
American Express Company price-eps-surprise | American Express Company Quote
The consensus mark for current-year revenues stands at $66.2 billion, suggesting a 9.4% rise from the prior-year reported number. AXP expects total revenues to grow at around 9-11% year over year in 2024. Looking ahead, the company anticipates a continuous revenue growth trajectory, targeting more than 10% in the long run.
Both Billed Business and Processed Volumes are poised for sustained growth, contributing to the overall expansion of network volumes. This will play a major role in top-line growth. Growth in goods and services, travel and entertainment spending should fuel growth in the future. As consumer spending is proving to be resilient despite rising inflation, demand for travel and dining experiences is expected to be on the uprise, benefiting AXP’s top line. Growing U.S. consumer billings are expected to drive billing revenues for AXP. The number of transactions from AXP’s card members continues to rise in double digits year over year, and good customer engagement poises this metric to increase in the future.
The International Card Services segment, as well as the Global Merchant and Network Services unit, are expected to continue witnessing growth, driven by an increase in card member spending and growing network volumes, respectively. Card fees are expected to witness growth, supported by AXP’s new card acquisitions.
The emphasis on small and medium-sized enterprises positions AmEx for sustained long-term growth. It partnered with American Express Global Business Travel, to aid them in managing expenses efficiently. This move bodes well for its Commercial Services segment. The acquisition of Kabbage is anticipated to play a crucial role in this strategy. Additionally, AXP actively engages in partnerships and collaborations to strengthen its digital capabilities, aiming to deliver efficient billing, payment processes and other services for its clients. The company recently partnered with POINT.ME in a bid to ease the booking of flights using points earned by the Card Members from AXP’s Membership Rewards program. AXP also streamlined its operations with the sale of Accertify to Accel-KKR.
American Express' robust return on equity of 31% (compared with the industry average of 19.8%) serves as a key indicator of its growth potential. It underscores the company's strategic prowess in effectively deploying shareholders' funds and highlights its financial strength.
Closing the fourth quarter, the company reported a robust financial position, with cash & cash equivalents standing at $47 billion, marking a significant increase from the $34 billion recorded at the end of 2022. Simultaneously, short-term borrowings remained manageable at $1 billion.
In 2023, AXP allocated $3.5 billion to share buybacks and distributed common stock dividends of $1.8 billion. The company also hiked its quarterly dividend by 17% to 70 cents per share in the first quarter of 2024. This underscores the company's dedication to enhancing shareholder returns.
Key Risks
However, there are a few factors that investors should keep an eye on.
Escalating expenses are exerting downward pressure on its margins. Last year, expenses jumped 10% year over year. The company expects variable customer engagement expenses to grow slightly higher than its revenues in 2024. AXP expects total expenses to increase in mid to high-level digits for 2024.
Also, American Express’ 12-month forward price-to-earnings multiple of 16.7X is higher than 13.1X of the industry. This valuation indicates a slightly higher expense relative to industry peers at the current level. Nevertheless, we believe that a systematic and strategic plan of action will drive AXP’s growth in the long term.
Other Stocks to Consider
Some other top-ranked stocks in the Finance space are First Internet Bancorp (INBK - Free Report) , Coinbase Global (COIN - Free Report) and Affiliated Managers Group, Inc. (AMG - Free Report) . First Internet Bancorp and Coinbase Global currently sport a Zacks Rank #1 (Strong Buy), and Affiliated Managers carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The bottom line of First Internet Bancorp outpaced estimates in three of the last four quarters and matched the mark once, the average surprise being 30.6%. The Zacks Consensus Estimate for INBK’s 2024 earnings suggests a surge of 64.5% from the year-ago reported figure, while the same for revenues suggests growth of 22.6%. The consensus mark for INBK’s 2024 earnings has moved 24.9% north in the past 60 days.
Coinbase has a decent track record of beating earnings estimates in each of the last four quarters, the average being 377.6%. The Zacks Consensus Estimate for COIN’s 2024 earnings per share indicates a year-over-year increase of 313.5%.
Affiliated Managers’ earnings outpaced estimates in each of the trailing four quarters, the average surprise being 7.1%. The Zacks Consensus Estimate for AMG’s 2024 earnings suggests an improvement of 10% from the year-ago reported figure, while the same for revenues suggests growth of 4%. The consensus mark for AMG’s 2024 earnings has moved 1.1% north in the past 30 days.