Yahoo Finance Here's What You Should Know Ahead of AmEx (AXP) Q1 Earnings
American Express Company AXP is set to report first-quarter 2023 results on Apr 20, before the opening bell.
In the last reported quarter, the diversified financial services company’s adjusted earnings per share of $2.07 missed the Zacks Consensus Estimate by 5.1%, primarily due to higher operating and customer engagement costs. Weakness in International Card Services and Commercial Services businesses affected AmEx’s profit levels. The negatives were partially offset by continued business momentum, better volumes and higher Card Member spending.
Let’s see how things have shaped up before the first-quarter earnings announcement.
What Do the Estimates Say?
The Zacks Consensus Estimate of $2.70 per share for first-quarter earnings has remained stable over the past week. The consensus mark indicates a 1.1% decline from the year-ago reported figure, while our estimate suggests a 4.3% fall. American Express beat earnings estimates in three of the trailing four quarters and missed once, delivering an average surprise of 4.5%. This is depicted in the graph below.
American Express Company Price and EPS Surprise
American Express Company price-eps-surprise | American Express Company Quote
The Zacks Consensus Estimate for first-quarter revenues is pegged at $14 billion, suggesting a jump of 19% from the year-ago reported figure. We expect first-quarter revenues to witness a 19.5% year-over-year increase.
Factors to Note
American Express is likely to have witnessed improved volumes in the to-be-reported quarter, a trend seen over the last several quarters. It is expected to have increased due to total network volumes and billed business volumes. The Zacks Consensus Estimate for first-quarter total network volumes indicates 15.9% year-over-year growth, while our estimate suggests a 21.6% increase.
An overall resilient consumer spending level is likely to have supported Discount revenues, AXP’s largest revenue driver. The Zacks Consensus Estimate for first-quarter Discount revenues indicates 15.5% year-over-year growth, while our estimate suggests an 18.7% increase.
Travel and Entertainment (T&E) is rapidly increasing in most parts of the world, overcoming the COVID-19 woes. T&E-related spending is likely to have jumped in the quarter under review. Fees, commissions and other revenues are expected to have improved on the back of an uptick in travel-related revenues. As such, card acquisitions in some of AXP’s largest travel co-brand portfolios are anticipated to have expanded.
Cards-in-force is expected to have witnessed an uptick in the quarter under review. While the consensus mark for total cards-in-force indicates a 9.6% year-over-year increase, our estimate suggests 10.2% growth.
American Express’s interest income, the second-largest revenue contributor, is likely to have risen on higher loan disbursements. The consensus mark for AXP’s interest income suggests an upside of 59.7% from the year-ago reported figure. We expect the figure to increase 39.1% from the year-ago period. Further, the Zacks Consensus Estimate for Global Merchant and Network Services’ pre-tax income indicates a 6.5% year-over-year increase while our estimate suggests an 8% jump.
The above-mentioned factors are likely to have contributed to AXP’s first-quarter performance. However, the rising expenses in global commercial services, card member rewards, marketing and business development are expected to have reduced margins, making an earnings beat uncertain. Our estimate suggests total expenses to have witnessed a 20.2% year-over-year increase in the quarter, which is likely to have reduced profit levels.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for American Express this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company’s Earnings ESP is -1.45%. This is because the Most Accurate Estimate currently stands at $2.66 per share, lower than the Zacks Consensus Estimate of $2.70.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: American Express currently carries a Zacks Rank #3.
Stocks to Consider
While an earnings beat looks uncertain for American Express, here are some companies from the broader finance space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
Owl Rock Capital Corporation ORCC has an Earnings ESP of +0.47% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Owl Rock Capital’s bottom line for the to-be-reported quarter is pegged at 43 cents per share, implying a 38.7% jump from the year-ago figure. ORCC beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 2.1%.
Aon plc AON has an Earnings ESP of +1.31% and a Zacks Rank of 3.
The Zacks Consensus Estimate for AON’s bottom line for the to-be-reported quarter is pegged at $5.25 per share, which witnessed two upward estimate revisions in the past 30 days against none in the opposite direction. AON beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 2.1%.
MarketAxess Holdings Inc. MKTX has an Earnings ESP of +0.33% and a Zacks Rank of 3.
The Zacks Consensus Estimate for MarketAxess’ bottom line for the to-be-reported quarter is pegged at $1.89 per share, suggesting a 9.3% year-over-year increase. MKTX beat earnings estimates in all the past four quarters, with an average surprise of 3.8%.
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American Express Company (AXP) : Free Stock Analysis Report
Aon plc (AON) : Free Stock Analysis Report
Owl Rock Capital Corporation (ORCC) : Free Stock Analysis Report
MarketAxess Holdings Inc. (MKTX) : Free Stock Analysis Report
