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Here's Why You Should Retain AmEx (AXP) in Your Portfolio

Zacks Equity Research
·4-min read

American Express Company AXP is currently riding on rebounding revenues, an advanced digital solutions suite, innovative card offerings and a strong financial position.

Zacks Rank & Price Performance

American Express carries a Zacks Rank #3 (Hold) at present.

The stock has gained 38.4% in a year compared with the industry’s and the Finance sector’s rally of 14.2% and 21%, respectively. The S&P 500 composite has risen 26.1% in the said time frame.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Favorable Style Score

AXP is positioned well for progress, evident from its VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.

Robust Prospects

The Zacks Consensus Estimate for American Express’ 2022 earnings suggests growth of 1.1% from the year-ago reported figure while the same for revenues stands at a 14.4% rise. The expected long-term earnings growth rate is pegged at 20%, better than the industry’s average of 17.2%.

Positive Estimate Revision

The Zacks Consensus Estimate for 2022 earnings has moved 0.5% north in the past 30 days.

Impressive Earnings Surprise History

American Express’ earnings beat estimates in each of the trailing four quarters, the average being 35.38%.

Solid Return on Equity

The ROE of AXP for the trailing 12 months is 28.5%, which remains higher than the industry average of 22.3%. This reflects American Express’ efficiency in utilizing its shareholders’ funds.

Business Tailwinds

Following a dismal period of COVID-induced low business volumes in 2020, the top line of Amercian Express has been on a turnaround this year so far. The reason can be attributed to increased consumer spending and resumption of business activities, aided by the gradual recovery of global economy. This is likely to offer an impetus to the travel and entertainment (T&E) business of AXP, which carries high-profit margins.

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With increased spending on goods and services witnessed in the first three quarters of 2021, AXP expects full-year revenue growth to be roughly 15%, which came against the year-ago decline of 17.1%.

This presently Zacks Rank #3 (Hold) integrated payments player continues to launch innovative card offerings and upgrade the existing ones to cater to the evolving needs of its card members.

To cash in on the growing popularity of contactless payments, American Express pursues a series of measures focused on technology advancements, introduction of secure digital solutions and assistance in businesses to regulate payments.

American Express unveiled a proprietary automated accounts payable (AP) solution in 2020 for automating the accounts payable process with an innovative, end-to-end solution. These initiatives bolstered the digital suite and the global foothold of the financial services provider.

A strong cash position provides AXP with sufficient cash reserves to service its short-term debt obligations. American Express has robust cash-generating abilities in place, enabling it to pursue significant business investments and tactical capital-deployment moves via share buybacks and dividend payments.

Stocks to Consider

Some better-ranked stocks in the finance space are Houlihan Lokey, Inc. HLI, Oportun Financial Corporation OPRT and Jefferies Financial Group Inc. JEF. While Houlihan Lokey and Oportun Financial sport a Zacks Rank #1 (Strong Buy), Jefferies Financial carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Houlihan Lokey’s earnings surpassed estimates in each of the last four quarters, the average being 39.53%. The Zacks Consensus Estimate for HLI’s 2022 earnings has moved 2.3% north in the past 30 days. HLI has a Growth Score of B.

The bottom line of Oportun Financial surpassed estimates in each of the trailing four quarters, the average being 452.71%. The consensus mark for OPRT’s 2022 earnings implies 7.9% growth from the year-ago reported figure and has also moved 8.1% north in the past 60 days. OPRT has a Growth Score of B.

Jefferies Financial’s earnings outpaced estimates in each of the last four quarters, the average being 222.85%. The Zacks Consensus Estimate for JEF’s 2022 earnings has moved 9.7% north in the past seven days. JEF boasts a VGM Score of A.

Shares of Houlihan Lokey, Oportun Financial and Jefferies Financial have gained 51.6%, 8.3% and 59.9%, respectively, in a year.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

American Express Company (AXP) : Free Stock Analysis Report

Jefferies Financial Group Inc. (JEF) : Free Stock Analysis Report

Houlihan Lokey, Inc. (HLI) : Free Stock Analysis Report

Oportun Financial Corporation (OPRT) : Free Stock Analysis Report

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Zacks Investment Research