American Express: Insights on Upcoming Earnings and Expectations
Introducing American Express Company
American Express Company (NYSE: AXP) stands as a significant player in the financial services sector. As we approach the third-quarter earnings report, there is heightened anticipation around the company's performance, especially following a series of solid results in previous quarters.
Earnings Estimates and Historical Performance
Analysts are expecting American Express to report a third-quarter revenue of approximately $18.05 billion, a noticeable increase from $16.64 billion seen in the same period last year. This reflects a positive growth trajectory that the company has maintained.
The firm has consistently exceeded analyst expectations for revenue, achieving this in three consecutive quarters and in six out of the last ten quarters. Additionally, earnings per share (EPS) are anticipated to come in at $4.00, marking an increase from $3.49 in the third quarter of the previous year.
Analysts’ Insights
In a recent commentary, Truist Securities analyst Brian Foran reaffirmed a Buy rating with a price target of $375 on American Express shares. He highlighted that the updated Platinum card, despite receiving mixed reviews, shows potential for enhanced demand based on user feedback.
Foran pointed out that while the new higher annual fee is a concern, surveys indicate that most cardholders are inclined to renew their subscriptions, suggesting a robust customer base ready to accept the changes.
Nevertheless, he cautioned that the company must manage escalating marketing and technology costs, which might surpass revenue growth, alongside the possibility of credit deterioration amid economic uncertainties.
Analyst Ratings and Price Targets
The analyst landscape for American Express remains optimistic, with various firms adjusting their price targets upwards. Notably:
- UBS has maintained a Neutral rating, increasing the price target from $330 to $340.
- JPMorgan also upheld a Neutral rating while raising its price target from $343 to $355.
- Barclays decided on an Equal-Weight rating, boosting their price target from $297 to $336.
- Keefe, Bruyette & Woods has kept an Outperform rating, raising the target from $371 to $394.
- Evercore ISI Group maintained an In-Line rating and lifted the price target from $330 to $365.
Key Factors to Monitor
As anticipation builds for the earnings report, American Express's recent upgrades in perks and fees will likely be in focus. Investors will look for insights on consumer demand and potential cancellations linked to the higher fee structure.
The company is aiming to attract Millennials and Gen Z consumers, offering new benefits designed for these demographics, which account for about 35% of their customer base—an increase from 19% in 2019. This strategic shift could help mitigate the effects of the elevated fees.
Recent Financial Performance
In its previous quarter, American Express reported strong growth in Card Member spending, alongside a noteworthy increase in net interest income. Revenue, after accounting for interest expenses, rose by 9% year-on-year.
Moreover, Card Member spending surged by 7% year-on-year, totaling $416.3 billion in the last reported quarter. This metric is crucial as it provides insights into the ongoing growth of the company and serves as a barometer for the broader U.S. economy.
The International Card Services segment witnessed an impressive 14.5% growth year-on-year, contrasting with a 3.2% increase in Global Merchant and Network Services revenue.
Given these performance indicators, analysts will be keenly observing the company’s expense trends, which rose by 14% year-over-year previously. A crucial point of interest will be whether the growth in costs is outpaced by revenue enhancements.
The Berkshire Connection
American Express holds a significant position within Berkshire Hathaway Inc. (NYSE: BRK), where it constitutes around 16.7% of the investment portfolio. The conglomerate, led by the esteemed Warren Buffett, holds approximately 21.8% of American Express shares.
This connection not only underscores the intrinsic value seen in American Express but also hints at potential market impacts from its quarterly results on the Dow Jones Industrial Average, as it remains one of the index's largest constituents.
Current Stock Performance
As of recent trading, American Express shares were priced at $333.02, which falls within its 52-week trading range of $220.43 to $349.19. The stock has shown a year-to-date increase of 11.6% as of the latest market close.
Frequently Asked Questions
What are the expected earnings for American Express this quarter?
Analysts expect American Express to report earnings of approximately $4.00 per share.
How does the current year compare to last year’s quarter?
This year’s revenue is expected to be around $18.05 billion, up from $16.64 billion in the same quarter last year.
What are the challenges facing American Express?
American Express faces challenges such as rising marketing costs and possible credit deterioration due to a weaker economic landscape.
Who are the significant stakeholders in American Express?
American Express is a major holding for Berkshire Hathaway, which has a 21.8% stake in the company.
How has American Express’s stock performed this year?
The stock is up 11.6% year-to-date, showing resilience and growth in the current market conditions.
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