American Express is scheduled to report earnings after Wednesday's close. The stock hit a record high of $96.24/share in 2014 and is currently trading near $92/share. The stock is prone to big moves after reporting earnings and can easily gap up if the numbers are strong. Conversely, if the numbers disappoint, the stock can easily gap down. To help you prepare, here is what the Street is expecting:
Earnings Preview:
American Express is expected to earn $1.48/share on $8.32 billion in revenue. Meanwhile, the so-called Whisper number is $1.50. The Whisper number is the Street's unofficial view on earnings.
What The Pros Are Saying:
Peter Bortel, General Partner Tiburon Opportunity Fund and President Bortel Investment Management said,
"American Express is up 7 percent since July 19th the last earning report vs 3 percent for the s&p 500. We expect an earnings beat of of 1.54 vs the 1.48 street estimate. However we are confident questions on the call will touch on the Supreme Court decision to hear the Anti Steering case where axp is the defendant. While we expect the stock to be up on the number we would not be surprised to see AXP lose some of those gains after the call."
Mary L. Hill, CIO, Hill Global Investments, LLC told me,
"American Express is in a very precarious situation because the company is struggling to recover from the Costco blow. Additionally, many younger consumers do not want to pay high fees for a credit card. It will be very interesting to see what happens to AXP over the next few years."
John Hintz, CFA, Co-CIO, Winch Financial said via email,
"For American Express, we are expecting the company to beat current EPS estimates of $1.48 and revenue estimates of $8.3 billion. The company has been concentrating on lowering its cost structure, which should help increase profit margins. We find the stock inexpensive with its current next twelve months P/E right in-line with its 15-year historical average for this measure. In addition, AXP’s current next twelve month’s P/E relative to the S&P 500 is .82 times versus its 15-year historical slight premium of 1.04 times. We see the stock outperforming the S&P 500 over the next year as the company delivers on expectations and achieves some multiple expansion."
David Garff, CIO, Accuvest Global Advisors
"American Express shares have almost recovered from the sharp drop caused by the loss of Costco. Significant gains from here may require faster revenue and EPS growth. AmEx seeks to exploit its dominant position in business cards to increase revenue in that underpenetrated market. It expects lower processing rates to entice most U.S. merchants to accept its cards by 2019, perhaps aiding efforts to capture business-card sales. Efforts to tap existing U.S. consumers to recover lost market share face intense competition from reward cards from Chase and many others. Online sales for AmEx have been strong, but it has trailed Visa and MasterCard in launching digital payment services and may need its own partnership with PayPal. In 2016, U.S. Consumer represented 39% of net revenue, followed by Global Commercial (31%), International and Network (17%) and Global Merchant (14%)."
Company Profile:
Here is a brief company profile courtesy of Thomson Reuters Eikon:
American Express Company, incorporated on June 10, 1965, together with its subsidiaries, is a global services company. The Company's principal products and services are charge and credit card products, and travel-related services offered to consumers and businesses around the world. The Company's segments include the U.S. Consumer Services (USCS), International Consumer and Network Services (ICNS), Global Commercial Services (GCS) and Global Merchant Services (GMS). The Company's range of products and services includes network services; merchant acquisition and processing, servicing and settlement, and point-of-sale marketing and information products and services for merchants; other fee services, including fraud prevention services and the design and operation of customer loyalty programs; expense management products and services, and stored value/prepaid products.
Competition:
The Company competes with Visa, MasterCard, Discover, JCB and China UnionPay, National Payments Corporation of India, PayPal, Square, Amazon and Venmo.
Pay Attention To How The Stock Reacts To The News:
From where I sit, the most important trait I look for during earnings season is how the market and a specific company reacts to the news. Remember, always keep your losses small and never argue with the tape.
