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What's in Store for American Express (AXP) Earnings in Q3?

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American Express Co.’s (AXP - Free Report) third-quarter 2019 earnings results, scheduled for release on Oct 18, are expected to reflect a well-balanced mix of spending, fees and loans spread across geographies and customer segments.

For the to be reported quarter, the Zacks Consensus Estimate for earnings is pegged at $2.07, indicating an increase of 10.11% from the year-ago reported figure on revenues of $10.97 billion, implying an improvement of 8.17% from the prior-year reported number.

Factors Likely to Influence Q3 Results

The third quarter is expected to have seen solid trends in Card Member spending, led by consumers. This spending is emerging as the backdrop of an economy that is growing at a steady, with more modest pace relative to 2018.

In the Consumer space, the company is likely to have reported an increase in card fee revenues as most newly-issued cards carry an annual fee. To this end, the company has been levying annual card fees on exchange of unique benefits, services and experiences in categories of travel, dining, and access to popular events and experiences. Notably, it has already received a good response from its customers, who are willing to pay annual fees to avail these benefits.

On the Commercial payment side, the company is scaling its Business to Business (B2B) payment offering by expanding the network of its strategic partnerships with providers like Amazon Business, Tradeshift, SAP Ariba, Wax, MineralTree and others. This strategic move is likely to be reflected in the impending quarterly report.

The company’s efforts to build on digital and mobile payment platform are also likely to have aided revenue growth. In this regard, the company has acquired a number of digital entities over the past 18 months including Mezi, LoungeBuddy, Cake Technologies, Pocket Concierge and Resy, the US restaurant booking and management platform.

As a result of many new services offered by the company, its card members are engaging with its app more frequently and on a wider range of activities in addition to performing traditional transactions by checking their spending amounts and paying their bills.  This strategy is driving growth in spending, lending, customer acquisitions and engagement across businesses and geographies, thereby leading to overall revenue growth.

Talking about specific segments, revenues are expected to have grown at each of the company’s three segments, namely Global Consumer Services Group, Global Commercial Services and Global Merchant and Network Services.

The Global Consumer Services segment is also expected to have gained from a rise in loans, Card Member spending and card fees.
Further, Global Commercial Services revenues are likely to have increased from higher Card Member spending.

Global Merchant and Network Services revenues might have risen owing to higher worldwide Card Member spending.

Earnings Surprise History

The company boasts an attractive earnings surprise history, having surpassed estimates in three of the trailing four quarters, the average beat being 0.94%. This is depicted in the chart below:

American Express Company Price and EPS Surprise

Here is What Our Quantitative Model Predicts:

 

The proven Zacks model does not conclusively show that American Express is likely to beat on earnings this reporting cycle because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as highlighted below.

Earnings ESP: American Express has an Earning ESP of -1.98%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: American Express carries a Zacks Rank #3, which increases the predictive power of ESP. However, its -0.50% ESP in the combination leaves surprise prediction inconclusive.

We caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies worth considering in the Financial Miscellaneous sector as our model shows that these have the right combination of elements to beat estimates this to-be-reported quarter:

Synchrony Financial (SYF - Free Report) carries a Zacks Rank of 3 and has an Earnings ESP of +0.89%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Fiserv, Inc. (FISV - Free Report) is Zacks #2 Ranked and has an Earnings ESP of +4.26%.

Discover Financial Services (DFS) is a #3 Ranked player and has an Earnings ESP of +0.20%.

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