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Will Revenue Growth Aid American Express (AXP) Q3 Earnings?
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American Express Company (AXP - Free Report) is expected to report third-quarter 2018 results on Oct 18. Earnings should gain from revenue growth which should be driven by broad-based increases in card member spending and fees and higher loan volumes.
Moreover strengthening relationships with current customers and attracting new ones, through innovative products and services, disciplined control of operating expenses, combined with revenue growth should be seen in the third quarter.
Let’s see in details some of the factors that should drive Q3 results: Segment-wise, the company’s results should be like this:
Global Consumer Services Group: Net revenues should gain from higher loans, Card Member spending and fee income. We expect to see an increase in provision for losses led by growth in loan portfolio and increase in lending write-off rate.
Global Commercial Services: This segment should gain from an increase in Card Member spending, provision should be up primarily due to charge portfolio.
Global Merchant and Network Services: This segment should gain from higher propriety Card Member spending, partially offset by an increase in average discount rate and lower revenues from network partners.
Nevertheless, the company should see an increase in customer engagement expenses, marketing and business development. These costs should be further driven by increases in partner payments, due to recent co-brand negotiations, and agreements and growth in the company’s corporate business. Moreover, the company launched its new global brand campaign in the second quarter, which will lead to increased marketing spend to support brand refreshment. Also, the benefits of the Tax Act and the company’s strong performance for the first half of 2018, has allowed it to ramp up investment spending, with an aim to drive long-term sustainable revenues and earnings growth.
Also, results should disclose an increase in card member service costs, which is also one of the company’s fastest growing expense line. The rise in this cost is mainly due to the company’s efforts to provide differentiated value propositions to its card members such as airport lounge access and other travel benefits.
A decline in tax rate courtesy of the 2017 Tax Cuts and Jobs Act should aid net margins. Moreover, with the resumption of share buyback in the second quarter, the company should have continued the buyback activity in the third quarter, which should aid earnings per share.
Earnings Surprise Trend
The comany has an impessive earnings surprise trend having surpassed estimates in each of the four reported quarters, with an average positive surprise of 3.4%. This is depicted in the graph below:
Our proven model indicates that chances of American Express beating the Zacks Consensus Estimate are high as it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for American Express is +0.10%.
Zacks Rank: American Express currently has a Zacks Rank #2 (Buy), which increases the predictive power of ESP.
Other Stocks That Warrant a Look
Here are some other companies that you may consider as our model shows that these, too, have the right combination of elements to post an earnings beat this quarter:
Discover Financial Services (DFS - Free Report) has an Earnings ESP of +0.54% and a Zacks Rank #2 (Hold). The company is expected to report third-quarter earnings results on Oct 25.
Synchrony Financial (SYF - Free Report) has an Earnings ESP of +1.04% and a Zacks Rank #2. The company is expected to report third-quarter earnings results on Oct 19.
Visa Inc. (V - Free Report) has an Earnings ESP of +1.14% and a Zacks Rank #3. The company is expected to report third-quarter earnings results on Oct 24.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Will Revenue Growth Aid American Express (AXP) Q3 Earnings?
American Express Company (AXP - Free Report) is expected to report third-quarter 2018 results on Oct 18. Earnings should gain from revenue growth which should be driven by broad-based increases in card member spending and fees and higher loan volumes.
Moreover strengthening relationships with current customers and attracting new ones, through innovative products and services, disciplined control of operating expenses, combined with revenue growth should be seen in the third quarter.
Let’s see in details some of the factors that should drive Q3 results:
Segment-wise, the company’s results should be like this:
Global Consumer Services Group: Net revenues should gain from higher loans, Card Member spending and fee income. We expect to see an increase in provision for losses led by growth in loan portfolio and increase in lending write-off rate.
Global Commercial Services: This segment should gain from an increase in Card Member spending, provision should be up primarily due to charge portfolio.
Global Merchant and Network Services: This segment should gain from higher propriety Card Member spending, partially offset by an increase in average discount rate and lower revenues from network partners.
Nevertheless, the company should see an increase in customer engagement expenses, marketing and business development. These costs should be further driven by increases in partner payments, due to recent co-brand negotiations, and agreements and growth in the company’s corporate business. Moreover, the company launched its new global brand campaign in the second quarter, which will lead to increased marketing spend to support brand refreshment. Also, the benefits of the Tax Act and the company’s strong performance for the first half of 2018, has allowed it to ramp up investment spending, with an aim to drive long-term sustainable revenues and earnings growth.
Also, results should disclose an increase in card member service costs, which is also one of the company’s fastest growing expense line. The rise in this cost is mainly due to the company’s efforts to provide differentiated value propositions to its card members such as airport lounge access and other travel benefits.
A decline in tax rate courtesy of the 2017 Tax Cuts and Jobs Act should aid net margins. Moreover, with the resumption of share buyback in the second quarter, the company should have continued the buyback activity in the third quarter, which should aid earnings per share.
Earnings Surprise Trend
The comany has an impessive earnings surprise trend having surpassed estimates in each of the four reported quarters, with an average positive surprise of 3.4%. This is depicted in the graph below:
American Express Company Price and EPS Surprise
American Express Company Price and EPS Surprise | American Express Company Quote
Why a Positive Surprise Likely?
Our proven model indicates that chances of American Express beating the Zacks Consensus Estimate are high as it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for American Express is +0.10%.
Zacks Rank: American Express currently has a Zacks Rank #2 (Buy), which increases the predictive power of ESP.
Other Stocks That Warrant a Look
Here are some other companies that you may consider as our model shows that these, too, have the right combination of elements to post an earnings beat this quarter:
Discover Financial Services (DFS - Free Report) has an Earnings ESP of +0.54% and a Zacks Rank #2 (Hold). The company is expected to report third-quarter earnings results on Oct 25.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Synchrony Financial (SYF - Free Report) has an Earnings ESP of +1.04% and a Zacks Rank #2. The company is expected to report third-quarter earnings results on Oct 19.
Visa Inc. (V - Free Report) has an Earnings ESP of +1.14% and a Zacks Rank #3. The company is expected to report third-quarter earnings results on Oct 24.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>