American Express (NYSE: AXP) is scheduled to report its fiscal Q4 2022 results on Friday, January 27, 2023. We expect American Express to post mixed results, with earnings beating the consensus but revenues missing the mark by a slight margin. The credit card giant reported better-than-expected results in the last quarter, with revenues increasing by 24% y-o-y to $13.56 billion. It was driven by a 23% y-o-y rise in the non-interest revenues, followed by a 29% growth in the net interest income. The noninterest revenues primarily benefited from a 23% increase in the discount revenues and a 39% growth in the service fees & other revenues. Further, the total billed business improved by 21% y-o-y in the quarter. We expect the Q4 revenues to follow the same trend.
Our forecast indicates that American Express’ valuation is $168 per share, which is 9% above the current market price of close to $154. Our interactive dashboard analysis on American Express’ Earnings Preview has more details.
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(1) Revenues to remain slightly below the consensus estimates
American Express’ revenues grew 28% y-o-y to $38.69 billion in the first three quarters of 2022.
- Non-interest revenues contribute close to 80% of the total revenues. It increased 28% y-o-y to $31.55 billion over the first nine months, driven by growth in discount fees, net card fees, and service fees & other revenue. Notably, the total billed business improved by 27% over the same period. We expect the Q4 results to follow the same trend.
- The NII increased 26% y-o-y to $7.1 billion in the first three quarters of the year. It was due to higher net interest rate margins and higher average card member loan balances. We expect the same trend to continue in Q4.
- Overall, we forecast American Express’s revenues to touch $52.8 billion in FY2022.
Trefis estimates American Express’s fiscal Q4 2022 revenues to be around $14.09 billion, marginally lower than the $14.22 billion consensus estimate.
(2) EPS is likely to top the consensus estimates
American Express Q4 2022 adjusted earnings per share (EPS) is expected to be $2.27 per Trefis analysis, almost 2% above the consensus estimate of $2.22. The adjusted net income decreased 6% y-o-y to $5.9 billion in the first nine months of 2022, despite growth in the top line. It was mainly due to an unfavorable build-up in provisions for credit losses from -$1.47 billion to $1.16 billion. We expect the same trend to drive the fourth-quarter results. Overall, American Express is likely to report an annual GAAP EPS of $10.04 in FY2022.
(3) Stock price estimate is 9% higher than the current market price
We arrive at American Express’ valuation, using an EPS estimate of around $10.04 and a P/E multiple of just below 17x in fiscal 2022. This translates into a price of $168, which is 9% above the current market price of around $154.
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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