Key Takeaways From American Express’ Q1 Results

by Trefis Team
American Express Company
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American Express (NYSE:AXP) released its first quarter results on April 18, with total revenues of $10.3 billion increasing by 6.65% over the prior year quarter. The company’s adjusted EPS came in at $2.01, beating street estimates slightly. Supported by revenue growth of 9% on an FX-adjusted basis, management has maintained its outlook of 8-10% revenue growth for the full year, despite a further cut in world GDP growth projections by the IMF earlier this month.

The Trefis price estimate for American Express stands at $110 per share, which is in line with the market price. You can view our interactive dashboard on How Has American Express Fared In Recent Quarters? to observe the quarterly revenue trends and modify yearly earnings to gauge the impact on the stock price, and see more of our financial services company data here.

Quarterly Growth Was Largely Broad-Based

  • Global Consumer Services Group: The total revenues for this segment grew by 9% to $5.6 billion over the prior year quarter, driven by net interest income and card member loans. The non-interest income, which primarily comprises of discount fees, increased by 7% to $3.7 billion over the prior year quarter, driven by similar growth in proprietary billed business. The average discount rate remained steady at 2.37% over the last five quarters, consistent with the company’s goal of earning higher discount revenues by keeping the discount rate steady.
  • Global Commercial Services: This segment contributes around 30% of total revenues and has grown at a CAGR of 14% for the past two years. The segment’s business has been strengthened by long-term partnerships with various retail and airline companies. The recent partnership extension with Delta Airlines until 2030 is a cornerstone for the commercial segment as it contributes about 8% of the company’s billings and 20% of lending. For the quarter, the segment’s revenues were up by 6% to $3.2 billion over the prior year quarter, driven by a similar increase in discount revenues.
  • Global Merchant And Network Services: This segment contributes around 20% of total revenues and largely earns non-interest income by charging processing fees for operating the American Express Network. The segment’s revenues remained almost flat over the prior year quarter as well as sequentially.

The total expenses (including provision for loan losses) as a percentage of total revenues increased over the prior year quarter and sequentially, driven mainly by non-interest expenses. These expenses account for salaries, marketing and promotion and customer rewards, and were up by 10% to $7.6 billion over the prior year quarter with a slight improvement sequentially. Card member rewards and marketing expenses account for nearly 53% of the non-interest expenses. Marketing expenses were higher for the first quarter, growing by 17% to $1.5 billion over the prior year quarter, to enhance customer engagement. The company’s management guided for more even marketing expense distribution over the year, which resulted in higher costs this quarter.

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