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Can Rising Costs Affect AmEx's (AXP) Q1 Earnings Growth?
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American Express Company (AXP - Free Report) is set to report its first-quarter 2024 results on Apr 19, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for first-quarter earnings per share of $3 suggests a 25% increase from the prior-year figure of $2.40. The consensus mark increased by a penny over the past week. The consensus estimate for first-quarter revenues of $15.8 billion indicates a 10.3% 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 1.1%. 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.
Q4 Earnings Rewind
In the last reported quarter, the globally integrated payments company’s adjusted earnings per share of $2.62 missed the Zacks Consensus Estimate by 1.1% due to escalating customer engagement and compensation expenses. Nevertheless, the downside was partly offset by improved net interest income and increased Card Member spending, leading to strong segmental contribution.
Now, let’s see how things have shaped up before the first-quarter earnings announcement.
Q1 Factors to Note
American Express is expected to have seen a rise in network volumes during the first quarter, continuing a trend seen in recent quarters. This uptick is likely attributable to higher consumer spending, total billed business and processed volumes. The Zacks Consensus Estimate for first-quarter total network volumes indicates 5.4% year-over-year growth from $398.9 billion.
Discount revenues, a key source of revenue for AmEx, are likely to have received support from a relatively resilient consumer spending level. The Zacks Consensus Estimate for first-quarter Discount revenues indicates 5.9% year-over-year growth.
In the first 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 first-quarter International Card Services pre-tax income indicates a 4.2% improvement from the year-ago period’s $189 million.
Cards-in-force is likely to have witnessed an uptick in the quarter under review. The Zacks Consensus Estimate for first-quarter total cards-in-force indicates 5.9% year-over-year growth. The consensus estimate for Average Card Member loans also implies 14.8% 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 total interest income suggests an upside of almost 27.3% from the year-ago reported figure of $4.4 billion. Also, the consensus mark for Global Merchant and Network Services’ pre-tax income indicates an 8.2% 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.
First-quarter client engagement costs are likely to have increased due to expanding Card Member spending and higher usage of travel-related benefits, along with rising compensation and service costs, making an earnings beat uncertain. 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 first 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 -0.70%. This is because the Most Accurate Estimate currently stands at $2.98 per share, lower than the Zacks Consensus Estimate of $3.
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 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 CleanSpark’s bottom line for the to-be-reported quarter is pegged at 6 cents per share, indicating a 126.1% improvement from the year-ago period. The consensus estimate for CLSK’s revenues is pegged at $105 million, suggesting a 146.6% increase from a year ago.
Mr. Cooper Group Inc. (COOP - Free Report) has an Earnings ESP of +1.90% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Mr. Cooper Group’s bottom line for the to-be-reported quarter is pegged at $2.11 per share, indicating 80.3% year-over-year growth. The estimate grew by 4 cents in the past week. The consensus estimate for COOP’s revenues is pegged at $493.9 million, suggesting a 49.7% increase from a year ago.
SLM Corporation (SLM - Free Report) has an Earnings ESP of +6.44% and a Zacks Rank of 3.
The Zacks Consensus Estimate for SLM Corporation’s bottom line for the to-be-reported quarter is pegged at $1 per share, suggesting a 112.8% year-over-year increase. The estimate increased by 3 cents over the past week. The consensus estimate for SLM’s revenues is pegged at $376.2 million.
Image: Bigstock
Can Rising Costs Affect AmEx's (AXP) Q1 Earnings Growth?
American Express Company (AXP - Free Report) is set to report its first-quarter 2024 results on Apr 19, before the opening bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for first-quarter earnings per share of $3 suggests a 25% increase from the prior-year figure of $2.40. The consensus mark increased by a penny over the past week. The consensus estimate for first-quarter revenues of $15.8 billion indicates a 10.3% 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 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
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.
Q4 Earnings Rewind
In the last reported quarter, the globally integrated payments company’s adjusted earnings per share of $2.62 missed the Zacks Consensus Estimate by 1.1% due to escalating customer engagement and compensation expenses. Nevertheless, the downside was partly offset by improved net interest income and increased Card Member spending, leading to strong segmental contribution.
Now, let’s see how things have shaped up before the first-quarter earnings announcement.
Q1 Factors to Note
American Express is expected to have seen a rise in network volumes during the first quarter, continuing a trend seen in recent quarters. This uptick is likely attributable to higher consumer spending, total billed business and processed volumes. The Zacks Consensus Estimate for first-quarter total network volumes indicates 5.4% year-over-year growth from $398.9 billion.
Discount revenues, a key source of revenue for AmEx, are likely to have received support from a relatively resilient consumer spending level. The Zacks Consensus Estimate for first-quarter Discount revenues indicates 5.9% year-over-year growth.
In the first 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 first-quarter International Card Services pre-tax income indicates a 4.2% improvement from the year-ago period’s $189 million.
Cards-in-force is likely to have witnessed an uptick in the quarter under review. The Zacks Consensus Estimate for first-quarter total cards-in-force indicates 5.9% year-over-year growth. The consensus estimate for Average Card Member loans also implies 14.8% 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 total interest income suggests an upside of almost 27.3% from the year-ago reported figure of $4.4 billion. Also, the consensus mark for Global Merchant and Network Services’ pre-tax income indicates an 8.2% 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.
First-quarter client engagement costs are likely to have increased due to expanding Card Member spending and higher usage of travel-related benefits, along with rising compensation and service costs, making an earnings beat uncertain. 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 first 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 -0.70%. This is because the Most Accurate Estimate currently stands at $2.98 per share, lower than the Zacks Consensus Estimate of $3.
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 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:
CleanSpark, Inc. (CLSK - Free Report) has an Earnings ESP of +66.67% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CleanSpark’s bottom line for the to-be-reported quarter is pegged at 6 cents per share, indicating a 126.1% improvement from the year-ago period. The consensus estimate for CLSK’s revenues is pegged at $105 million, suggesting a 146.6% increase from a year ago.
Mr. Cooper Group Inc. (COOP - Free Report) has an Earnings ESP of +1.90% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Mr. Cooper Group’s bottom line for the to-be-reported quarter is pegged at $2.11 per share, indicating 80.3% year-over-year growth. The estimate grew by 4 cents in the past week. The consensus estimate for COOP’s revenues is pegged at $493.9 million, suggesting a 49.7% increase from a year ago.
SLM Corporation (SLM - Free Report) has an Earnings ESP of +6.44% and a Zacks Rank of 3.
The Zacks Consensus Estimate for SLM Corporation’s bottom line for the to-be-reported quarter is pegged at $1 per share, suggesting a 112.8% year-over-year increase. The estimate increased by 3 cents over the past week. The consensus estimate for SLM’s revenues is pegged at $376.2 million.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.