AXP Earnings Preview: Watch for the guidance
AInvestThursday, Oct 17, 2024 3:54 pm ET
2min read
AXP --

American Express (AXP) is set to report its Q3 2024 earnings tomorrow before the market opens, with analysts expecting EPS of $3.38 and revenue of $16.68 billion. This would represent year-over-year growth, but investors are particularly focused on billings and overall revenue growth, as management has consistently described the consumer as “stable.” While AXP’s full-year revenue guidance is 9-11%, investor skepticism remains as the consensus estimate for 2024 revenue growth stands at the lower end of the range at 9%.

A key focus for investors will be whether American Express can meet its EPS growth target of mid-teens, which management has reiterated. The company has emphasized cost levers within the business that could help maintain profitability even as revenue growth moderates. Recent consumer data indicating higher delinquency concerns will also be closely watched, particularly given the current macroeconomic environment and rising debt levels among households. Analysts will look for any indications of how AXP is managing credit risks while maintaining growth.

Analyst sentiment heading into the report is mixed. Monness raised its price target for AXP to $300, maintaining a Buy rating, while noting that AXP’s affluent customer base should help it weather spending softness better than peers like Visa and Mastercard. On the other hand, BTIG downgraded AXP to Sell, citing expectations for deteriorating fundamentals, despite the stock's high expectations for improvement. HSBC also downgraded the stock from Buy to Hold, stating that while AXP has strong brand equity and manageable credit risk, the recent 47% year-to-date stock appreciation has already priced in these positives.

American Express has traded at a premium compared to its historical multiples, with a current valuation of 17x its 2025 EPS estimates, which is higher than its long-term average of 14x. This premium valuation has raised questions among investors, particularly in light of recent commentary from retailers and travel companies pointing to a more challenging spending environment, even for high-end consumers. The report may shed light on whether AXP’s high-end customer base continues to drive growth or if headwinds are starting to impact the company’s results.

Investors will also be looking for any updates on AXP’s guidance, particularly for 2025, as well as commentary on spending trends across key categories like travel and dining, which have shown signs of softening in recent months. As the company continues to position itself as a premium card network, the ability to leverage operating expenses and maintain strong growth in customer acquisition will be crucial to sustaining its growth trajectory.

American Express reported a solid Q2 2024, with adjusted earnings per share (EPS) of $3.49, beating the FactSet consensus estimate of $3.26. However, revenue for the quarter came in slightly below expectations at $16.33 billion, compared to the estimated $16.6 billion, though it still reflected a 9% year-over-year growth. The company saw robust card member spending, up nearly 40% since 2021, and added around 23 million new cards. Despite the revenue miss, the company maintained strong credit quality with lower-than-expected provisions for credit losses at $1.3 billion versus the $1.47 billion estimate.

In response to its strong core business performance, American Express raised its full-year EPS guidance to a range of $13.30 to $13.80, surpassing the previous consensus of $12.96. The company also reaffirmed its full-year revenue growth forecast of 9% to 11%. Management highlighted their ability to increase marketing investments by 15% without needing to use a $0.66 per share gain from the sale of Accertify, which was fully dropped to the bottom line, further boosting their full-year earnings outlook. Despite this positive guidance, AXP shares experienced some volatility in pre-market trading.

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