A month has gone by since the last earnings report for American Express (AXP). Shares have added about 2.7% 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 the most recent earnings report in order to get a better handle on the important catalysts.
American Express Q4 Earnings Beat on Higher Revenues
American Express’ fourth-quarter 2019 earnings of $2.03 per share, surpassed the Zacks Consensus Estimate by 1.5% and were up 16.7% year over year.
Total revenues of $11.4 billion came in line with the Zacks Consensus Estimate and were up 9% year over year. This is the 10th straight quarter in which the company posted foreign exchange adjusted revenue growth of at least 8%. Increase in earnings was driven by a well-balanced mix of growth in fee, spend and lend revenues.
Total expenses of $8.4 billion increased 9% year over year, due to growth in rewards and other customer engagement costs driven by increased Card Member spending, and higher usage of card benefits and operating expenses.
The company reported earnings per share of $8.20, up 11.9% year over year. Revenues net of interest expense for the full year were $43.6 billion, up 9%, on a constant-currency basis.
In 2019, the company added 11.5 million new proprietary cards and continued to deliver solid billings growth.
American Express’ Global Consumer Services segment reported net income of $846 million, up 21% year over year. Total revenues, net of interest expenses of $6.2 billion, were up 10% year over year, reflecting higher net interest income, card fees and Card Member spending.
Global Commercial Services’ net income of $617 million was down 1% year over year. Total revenues, net of interest expenses, increased 7% year over year to $3.5 billion, primarily reflecting higher Card Member spending, net interest income and card fees.
Global Merchant and Network Services’ net income rose 10% year over year to $549 million in the reported quarter. Total revenues and net of interest expenses were up 3% year over year to $1.7 billion.
For 2020, the company expects revenue growth in the range of 8% to 10%, on a foreign exchange-adjusted basis and earnings of $8.85-$9.25 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
Currently, American Express has an average Growth Score of C, however its Momentum Score is doing a bit 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.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, American Express has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.