American Express (NYSE: AXP) is scheduled to report its fiscal Q1 2022 results on Friday, April 22, 2022. We expect American Express to top the consensus estimates of revenues and earnings. The credit card giant posted better than expected results in the last quarter, with total revenues improving 30% y-o-y to $12.1 billion. It was mainly driven by a 35% y-o-y rise in non-interest revenues, followed by a 5% increase in net interest income (NII). The non-interest revenues benefited from higher network volumes (up 32%) and a 28% y-o-y increase in average proprietary basic card member spending. Similarly, the growth in NII was driven by higher outstanding loan balances, partially offset by a lower net interest margin. We expect the same trend to continue in the first-quarter results.
Our forecast indicates that American Express’ valuation is $197 per share, which is 6% above the current market price of close to $185. Our interactive dashboard analysis on American Express’ Earnings Preview has more details.
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(1) Revenues expected to beat the consensus estimates
American Express’ revenues increased 17% y-o-y in 2021 to $42.4 billion, primarily driven by a 23% growth in noninterest revenues, partially offset by a 3% drop in the net interest income (NII).
- The non-interest income contributed around 80% of the total revenues. It grew because of the recovery in consumer spending levels, thanks to the easing of travel curbs and lockdown restrictions in most parts of the world. Notably, the average proprietary basic card member spending increased by 25% y-o-y. Further, the improved consumer activity also led to a 25% rise in network volumes. We expect the same momentum to continue in the first-quarter results.
- The NII decreased 3% y-o-y in 2021, mainly due to a lower interest rate environment, partially offset by a 21% y-o-y increase in the card member loans. We expect it to see some growth in the first-quarter results.
- Overall, we expect American Express’s revenues to touch $49.8 billion for full-year 2022.
Trefis estimates American Express’s fiscal Q1 2022 revenues to be around $11.96 billion, 3% above the $11.61 billion consensus estimate. We expect the growth in non-interest revenues to drive the first-quarter results.
The recovery in consumer spending levels and improvement in the economy is likely to drive the non-interest revenues. Further, the Fed is expected to increase the interest rates in the year, benefiting the NII. Our dashboard on American Express’ revenues offers more details on the company’s operating segments along with our forecast for FY2022.
(2) EPS is likely to remain slightly above the consensus estimates
American Express Q1 2022 adjusted earnings per share (EPS) is expected to be $2.47 per Trefis analysis, almost 2% above the consensus estimate of $2.43. The company’s adjusted net income grew 1.6x to $7.9 billion in 2021, mainly due to a significant reduction in the provisions for credit losses from $4.7 billion to -$1.4 billion.
The adjusted net income margin improved from 8.4% to 18.7% in 2021, mainly due to lower provisions. We expect the earnings and net interest margin to decrease on a year-on-year basis in the first quarter. Overall, American Express is likely to report an adjusted net income of $7.1 billion and annual EPS of $9.48 for full-year 2022.
(3) Stock price estimate 6% more than the current market price
We arrive at American Express’ valuation, using an EPS estimate of around $9.48 and a P/E multiple of just below 21x in fiscal 2022. This translates into a price of $197, which is 6% above the current market price of around $185.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
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