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Why Is American Express (AXP) Up 5.7% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for American Express Company (AXP - Free Report) . Shares have added about 5.7% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is AXP due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

AmEx  Q1 Earnings Top on Higher Card Member Spending

American Express Company  reported first-quarter 2018 adjusted earnings per share of $1.86, beating the Zacks Consensus Estimate by 8.77%. Moreover, the bottom line witnessed a marked 38% year-over-year improvement.

Better-than-expected results were mainly backed by growth in card billed business, an increase in total cards in force, higher Card Member spending and a lower tax rate. The company continues to witness strong loan growth and credit metrics. The quarter witnessed a double-digit rise in billed business, revenues and earnings.

Delving Deeper

Revenues came in at $9.7 billion, 0.47% ahead of the Zacks Consensus Estimate of $8.72 billion. The top line increased 12% year over year on higher Card Member spending, loans and fee income plus growth across the business lines.

Provisions for loss totaled $755 million, up 35% year over year, which is attributable to growth in the loan portfolio and an increase in the lending write-off and delinquency rates.

Total expenses of $6.9 billion increased 9% year over year due to an increase in rewards expenses and other costs associated with increased Card Member spending, higher usage of card benefits and continued investments in cobrand partnerships.

The effective tax rate was 22%, denoting a fall from 32% in the year-ago quarter, courtesy of the tax reform.

Segment Results

American Express’ U.S. Consumer Services segment reported net income of $640 million, up 30% year over year. Total revenues, net of interest expense of $3.7 billion, were up 13% year over year, reflecting higher loans and Card Member spending as well as benefit of the Hilton portfolio acquisition.

International Consumer and Network Services’ net income amounted to $291 million, up 15% year over year. Total revenues, net of interest expenses, climbed 12% (on a currency adjusted basis) year over year to $1.8 billion, primarily on the back of higher Card Member spending and net card fees.

Global Commercial Services’ net income of $552 million surged 35% year over year. Total revenues, net of interest expenses, increased 9% year over year to $3 billion, primarily reflecting higher Card Member spending.

Global Merchant Services’ net income rose 32% year over year to $472 million in the reported quarter. Total revenues, net of interest expenses, increased 10% year over year to $1.2 billion on higher Card Member spending, partially offset by a lower discount rate.

Corporate and Other reported net loss of $321 million, wider than $261 million loss incurred in the year-ago quarter.

2018 Guidance

Based on first-quarter results and solid trends for the remaining year, the company foresees full-year earnings per share at the high end of the $6.90-$7.30 range. Revenues are expected to increase at least 8%

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There have been four revisions higher for the current quarter compared to four lower.

American Express Company Price and Consensus

 

VGM Scores

At this time, AXP has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

AXP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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