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Can American Express (AXP) Pull a Surprise in Q3 Earnings?

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Global electronic payment processor American Express Co. (AXP - Free Report) or AmEx is scheduled to release third-quarter financial results after the closing bell on Oct 19.

In the last reported quarter, the company beat the earnings estimate by 9.4%. Moreover, the company posted a positive earnings surprise in three out of the last four reported quarters, with an average beat of 4.9 %. Let’s see how things are shaping up for this announcement.

Factors at Play

Lower gas and airline ticket prices remain headwinds across the company’s U.S. businesses.

Revenue will however benefit from the company’s key initiatives to accelerate growth by driving new card acquisitions across its global consumer and commercial portfolios and expanding merchant coverage.

Then again, third-quarter earnings may see a decline due to weak billed business following the end of the company’s relationship with Costco.
We expect to see expense reduction, given the company’s continued efforts to trim its cost base by $1 billion. This will, however, result in a restructuring charge to be absorbed by the quarter’s earnings.

The bottom line will also suffer from higher marketing and promotion expenses that reflect an elevated level of investment spending.

AMER EXPRESS CO Price and EPS Surprise

AMER EXPRESS CO Price and EPS Surprise | AMER EXPRESS CO Quote

Earnings Whispers

Our proven model does not conclusively show that AmEx is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.

Zacks ESP: The Most Accurate estimate of AmEX is pegged at 95 cents per share, a penny below the  the Zacks Consensus Estimate of 96 cents. The Earnings ESP is thus -1.04%.

Zacks Rank: AmEx carries a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s 0.00% ESP makes our surprise prediction difficult.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Alliance Data Systems Corporation (ADS - Free Report)   has an Earnings ESP of +0.24% and a Zacks Rank #3. The company is scheduled to report third-quarter earnings on Oct 20. You can see the complete list of today’s Zacks #1 Rank stocks here.

MarketAxess Holdings Inc. (MKTX - Free Report) has an earnings ESP of +1.30% and a Zacks Rank #3. The company is scheduled to report third quarter earnings on Oct 26.

FleetCor Technologies, Inc. (FLT - Free Report) has an Earnings ESP of +1.72% and a Zacks Rank #2. The company is scheduled to report third-quarter earnings on Nov 2.

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