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American Express (AXP) Up 7.9% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for American Express (AXP - Free Report) . Shares have added about 7.9% in that time frame, outperforming the S&P 500.

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

American Express Q4 Earnings Miss Estimates

American Express Company’s adjusted earnings per share of $1.80 missed the Zacks Consensus Estimate by 3.33% in fourth-quarter 2018.
However, the bottom line witnessed a 10.1% year-over-year improvement.

Lower-than-expected spending on cards led to the earnings miss.

Delving Deeper

Revenues (net of interest expenses) were $10.5 billion, missing the Zacks Consensus Estimate by 0.8%. The top line increased 8% year over year, driven by higher loan volumes, and an increase in Card Member spending and fees. Excluding the effect of foreign exchange rates, adjusted revenues, net of interest expenses, grew 10%.

Provisions for loss totaled $954 million, up 14% year over year, which was attributable to growth in loan and an increase in higher write-offs.
Total expenses of $7.7 billion increased 9% year over year due to higher reward expenses and other customer engagement costs, partly offset by lower operating expenses.

Strong Segmental Results

American Express’ Global Consumer Services segment reported net income of $702 million, up 13% year over year. Total revenues, net of interest expenses of $5.6 billion, were up 11% year over year, reflecting higher loans and Card Member spending as well as fee income.

Global Commercial Services’ net income of $624 million was up 15% year over year. Total revenues, net of interest expenses, increased 8% year over year to $3.3 billion, primarily reflecting higher Card Member spending.

Global Merchant and Network Services’ net income rose 9% year over year to $501 million in the reported quarter. Total revenues, net of interest expenses, remained stable year over year at $1.6 billion on higher Card

Member spending, partially offset by an expected decrease in the average discount rate and lower revenues from network partners.
Corporate and Other reported net income of $183 million against net loss of $2.8 billion recorded in the year-ago quarter.

Updates 2019 Guidance

Citing a mixed political and economic environment in 2019, the company provided earnings guidance of $7.85 to $8.35 per share and revenue growth between 8% and 10%.


 

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

Currently, American Express has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

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




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