American Express Company (AXP) will unveil its first-quarter results on April 19. Wall Street anticipates the credit card giant to post higher revenue and earnings in the first quarter. With AXP’s earnings expected shortly, I have discussed why waiting for an opportune entry point in the stock could be wise.
For the first quarter, AXP’s EPS and revenue are expected to increase 24.2% and 10.5% year-over-year to $2.98 and $15.79 billion, respectively. The company achieved record revenues and profits in 2023 and added 12.2 million new proprietary cards last year, bringing the total number of cards-in-force issued on its global network to over 140 million.
For fiscal 2024, AXP has guided revenue growth of 9% to 11% and expects EPS of between $12.65 and $13.15. The company aims to continue achieving revenue growth of 10% plus and mid-teens EPS growth in the future. AXP’s stock has gained 41% over the past six months and 33% over the past year, closing the last trading session at $217.67.
Here’s what you might want to consider ahead of its upcoming earnings release:
Robust Financials
AXP’s total revenues net of interest expense for the fiscal fourth quarter ended December 31, 2023, rose 11.4% year-over-year to $15.80 billion. Its net interest income rose 30.7% over the prior-year quarter to $3.60 billion. The company’s net income attributable to common shareholders increased 23.2% year-over-year to $1.90 billion. Also, its EPS came in at $2.62, representing an increase of 26.6% year-over-year.
For the fiscal year ended December 31, 2023, AXP’s total revenues net of interest expense increased 14.5% year-over-year to $60.52 billion. Its net interest income rose 32.7% over the prior-year period to $13.13 billion. The company’s net income attributable to common shareholders increased 11.5% year-over-year to $8.25 billion. Also, its EPS came in at $11.21, representing an increase of 13.8% year-over-year.
Favorable Analyst Estimates
Analysts expect AXP’s fiscal 2024 EPS and revenue to increase 14.2% and 9.4% year-over-year to $12.81 and $66.22 billion, respectively. Its fiscal 2025 EPS and revenue are expected to increase 15% and 8.6% year-over-year to $14.73 and $71.92 billion, respectively.
Similarly, analysts expect AXP’s EPS and revenue for the quarter ending June 30, 2024, to increase 12% and 9.8% year-over-year to $3.24 and $16.53 billion, respectively.
Mixed Profitability
AXP’s 15.06% trailing-12-month net income margin is 36% lower than the 23.52% industry average. Its 55.04% trailing-12-month gross profit margin is 7.7% lower than the 59.66% industry average.
On the other hand, AXP’s 31.28% trailing-12-month Return on Common Equity is 187.7% higher than the 10.87% industry average. Furthermore, the stock’s 3.21% trailing-12-month Return on Total Assets is 195.3% higher than the industry average of 1.09%. Also, its 0.23x trailing-12-month asset turnover ratio is 7.5% higher than the industry average of 0.21x.
Mixed Valuation
In terms of forward non-GAAP PEG, AXP’s 1.29x is 6.1% higher than the 1.21x industry average. Its 17x forward non-GAAP P/E is 72.1% higher than the 9.88x industry average. Likewise, its 5.04x forward Price/Book is 406.8% higher than the 0.99x industry average.
On the other hand, in terms of forward Price/Sales, AXP’s 2.37x is 0.8% lower than the 2.39x industry average.
POWR Ratings Reflect Uncertainty
AXP has an overall rating of C, equating to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. AXP has a C grade for Value, which is consistent with its mixed valuation. It has a C grade for Stability, in sync with its 1.23 beta.
AXP’s mixed profitability justifies its C grade for Quality.
AXP is ranked #19 out of 45 stocks in the Consumer Financial Services industry. Click here to access AXP’s Growth, Momentum, and Sentiment ratings.
Bottom Line
After ending fiscal 2023 on a solid note, AXP remains firmly positioned to achieve its long-term annual revenue growth of more than 10% and mid-teens EPS growth. As consumer spending continues to remain robust, the company is expected to see strong growth in billings, new account acquisitions, and processed volumes in the first quarter.
However, loans and cardmember receivables are expected to moderate through the rest of the year. Net interest income growth is also expected to moderate in fiscal 2024. Moreover, as credit card delinquencies continue to rise, write-offs are expected to increase along with higher reserve build-ups.
Given its mixed profitability, valuation, and stability, it could be wise to wait for a better entry point in the stock.
How Does American Express Company (AXP) Stack Up Against Its Peers?
AXP has an overall POWR Rating of C, equating to a Neutral rating. You may check out these A and B-rated stocks within the Consumer Financial Services industry: Qifu Technology, Inc. (QFIN), Atlanticus Holdings Corporation (ATLC), and EZCORP, Inc. (EZPW). For exploring more Buy-rated Comsumer Financial Services stocks, click here.
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AXP shares were unchanged in premarket trading Thursday. Year-to-date, AXP has gained 16.93%, versus a 5.64% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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