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American Express (AXP) Q2 Earnings & Revenues Beat, Up Y/Y

Zacks Equity Research

American Express Co. AXP second-quarter 2019 earnings of $2.07 per share surpassed the Zacks Consensus Estimate by 0.98% and were up 12.5% year over year.

Total revenues of $10.8 billion beat the Zacks Consensus Estimate by 0.14% and were up 8.4% year over year.  This is the eighth straight quarter in which the company posted foreign exchange adjusted revenue growth of more than 8%. This growth continues to be driven by a well balanced mix of spending, fees and loans spread across geographies and customer segments.

The company continues to witness solid trends in Card Member spending led by consumers. This spending can be attributed to an economy that is growing but at a modest pace relative to 2018.

American Express Company Price, Consensus and EPS Surprise

American Express Company Price, Consensus and EPS Surprise

American Express Company price-consensus-eps-surprise-chart | American Express Company Quote


Provisions for loss totaled $861 million, up 7% year over year, which was attributable to growth in loan (up 11% year over year), receivable portfolio and an increase in higher write-offs.

Total expenses of $7.8 billion increased 9% year over year, due to growth in rewards and other customer engagement costs driven by increased Card Member spending, higher usage of card benefits and continued investments in co-brand partnerships.

During the quarter, the company added 2.9 million new proprietary cards.Nearly 70% of these new cards carry an annual fee, which reinstates the fact that Card Members are taking up cards and willing to pay for premium value.

Segment Update

Strong Segmental Results

American Express’ Global Consumer Services segment reported net income of $738 million, down 4% year over year. Total revenues, net of interest expenses of $5.8 billion, were up 10% year over year, reflecting higher loans and Card Member spending as well as fee income.

Global Commercial Services’ net income of $644 million was up 14% year over year. Total revenues, net of interest expenses, increased 7% year over year to $3.4 billion, primarily reflecting higher Card Member spending.

Global Merchant and Network Services’ net income rose 16% year over year to $632 million in the reported quarter. Total revenues and net of interest expenses were up 5% year over year to $1.7 billion.

Guidance Update

American Express has reaffirmed its financial guidance for 2019. The company expects revenue growth of 8%–10% this year. In addition, its adjusted EPS guidance range for 2019 is $7.85–$8.35.

The company also expects to increase the regular quarterly dividend by 10.3% to 43 cents per share, beginning with the third quarter of 2019, subject to approval by its board of directors.

American Express carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Here are some finance stocks that you may want to consider as our model shows that these have the right combination of elements to beat on earnings in the upcoming releases.

Discover Financial Services DFS has an Earnings ESP of +0.18% and a Zacks Rank #3 (Hold).

PayPal Holdings, Inc. PYPL has an Earnings ESP of +11.19% and a Zacks Rank of 2 (Buy).

Mastercard Inc. MA has an Earnings ESP of +0.55% and a Zacks Rank of 3.

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