American Express Co. (AXP - Free Report) recently announced that even though it decides to stop any new employee hiring for this year but it will no way slash the existing jobs. This announcement came against the backdrop of the coronavirus-enforced business uncertainty.
The company is trying to rein in expenses to save its earnings when its revenues are already stressed due to drained cross-border business. Recently, the company provided an update on the COVID-19 effect on its financial performance.
The company’s operating expenses should moderate in 2020. In 2019, the company’s operating expenses grew 8% year over year. On fourth-quarter earnings conference call, management stated that some of its investments intended to fuel strong revenue growth, higher sales force, premium servicing ramp-up and enhancements in digital capabilities actually flared up the 2019 operating expenses to a degree greater than the level witnessed in recent years.
The company observed softness in spending volumes in the last few days of February after a usual solid performance in January and the most part of February. This weakness in business persisted and further deteriorated in March.
Accordingly, American Express now expects its first-quarter 2020 revenue growth in the range of 2-4% on an FX-adjusted basis and adjusted earnings per share in the $1.9-$2.1 band excluding reserve builds in the quarter.
Visa Inc. (V - Free Report) is also facing a dent in its cross-border travel-related spending. PayPal Holdings, Inc. (PYPL - Free Report) also its revenues being weighed down due to the COVID-19-triggered business loss.
Another company Mastercard Incorporated (MA - Free Report) also resorted to several strategic actions to manage its budget prudently including evaluating travel & entertainment, advertising & marketing and professional fees spending starting the first quarter of 2020. It convinces that all its efforts are in line with its intended investment in the long-term expansion of the business.
Year to date, the stock has lost 27.5% compared with its industry’s decline of 28.4%.
We believe, the ongoing coronavirus-led disruption is a blip and that the company’s brand name, strength and resilience of its business model should help it ride out the current unprecedented crisis.
American Express carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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