American Express Stock To Top The Consensus In Q2

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Trefis
AXP: American Express Company logo
AXP
American Express Company

American Express (NYSE: AXP) is scheduled to report its fiscal Q2 2023 results on Friday, July 21, 2023. We expect American Express to top the consensus estimates of both revenues and earnings. The credit card giant reported mixed results in the last quarter, with revenues beating expectations but earnings missing the mark. It reported net revenues of $14.28 billion – up 22% y-o-y. The revenue growth was driven by improvement in both interest-driven and non-interest income. While the net interest income (NII) benefited from higher interest rates and loan growth, the non-interest revenues were up due to an increase in billed business, premium cards portfolio, and foreign exchange-related income. We expect the same trend to continue in the second quarter.

Our forecast indicates that American Express’ valuation is $182 per share, which is 2% above the current market price of close to $178. Our interactive dashboard analysis on American Express’ Earnings Preview has more details. 

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(1) Revenues to beat the consensus estimates

American Express revenues grew 25% y-o-y to $52.86 billion in FY 2022. Further, the same momentum continued in the first quarter of 2023.

  • Non-interest revenues increased 18% y-o-y in Q1. Further, the total billed business improved by 15% over the same period. We expect the Q2 results to follow the same trend.
  • The NII increased 36% y-o-y in Q1. It was due to higher net interest rate margins and higher average card member loan balances. We expect the same trend to continue in Q2.
  • Overall, we forecast American Express’s revenues to touch $60.5 billion in FY2023.

Trefis estimates American Express’s fiscal Q2 2023 revenues to be around $15.93 billion, 3% more than the $15.48 billion consensus estimate. 

(2) EPS is likely to top the consensus estimates

American Express Q2 2023 adjusted earnings per share (EPS) is expected to be $2.86 per Trefis analysis, almost 2% above the consensus estimate of $2.81. The adjusted net income decreased 7% y-o-y to $7.5 billion in FY 2022, despite growth in the top line. It was mainly due to an unfavorable increase in the provisions for credit losses from -$1.4 billion to $2.2 billion. We expect the net income margin to see some improvement in Q2. Overall, American Express is likely to report an annual GAAP EPS of $11.08 in FY2023.  

(3) Stock price estimate is 2% higher than the current market price

We arrive at American Express’ valuation, using an EPS estimate of around $11.08 and a P/E multiple of just above 16x in fiscal 2023. This translates into a price of $182, which is 2% above the current market price of around $178. 

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 

What if you’re looking for a portfolio that aims for long-term growth? Here’s a value portfolio that’s done much better than the market since 2016.

 Returns Jul 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 AXP Return 2% 21% 140%
 S&P 500 Return 2% 19% 103%
 Trefis Multi-Strategy Portfolio 7% 27% 307%

[1] Month-to-date and year-to-date as of 7/19/2023
[2] Cumulative total returns since the end of 2016

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