Will Higher Revenues Aid American Express (AXP) Q1 Earnings?
Zacks Investment Research | Apr 15, 2018 10:17PM ET
American Express Company (NYSE:AXP) is expected to report first-quarter results on Apr 18. The performance is likely to reflect gains from its four strategic focus areas — strengthening leadership in the premium consumer segment; extending leadership in commercial payments and in particular with small and medium-sized enterprises; enhancing its digital platform; and strengthening its global integrated network to provide unique value. Results should also benefit from a lower corporate tax rate.
Revenues in the to-be reported quarter should see an upside from accelerated growth in billings and continued strong growth in loans and fees. Per the Zacks Consensus Estimate, revenues net of interest expense are expected to be $8.5 billion, up 7.8% year over year.
The company has suspended its share buyback program for the first half of 2018, in an effort to build up capital. The bottom line will thus be bereft of the benefit of share buyback.
Factors Affecting Q1 Results
Growth in Billed Business: The first quarter should reflect an increase in worldwide billed business across its diverse customer segments and geographies. U.S. proprietary consumer and international proprietary consumer billings growth should remain strong. The company saw strong performance from middle market and small business customers, while large and global commercial customers grew at a more modest pace, in the last quarter and the same should be seen in the first quarter. Global Network Services billed business should grow at a slower rate over the year than the proprietary business as a result of the impact of the evolving regulatory environment in Europe and Australia. Per the Zacks Consensus Estimate card billed business is expected to be $275 billion, up 9.1% year over year.
Increase in Loan and Recievables: Card Member loan and receivables growth should be seen as the company continues to expand its relationship with existing customers and acquire new Card Members. This should have, however, led to an increase in provisions for losses, lending delinquencies and net write-off rates. The increase in delinquencies and net write-off rates were primarily due to the seasoning of recent loan vintages and a shift in mix over time toward non-cobrand lending products, which have higher write-off rates but also drive higher net interest yields.
Increase in Total Cards in Force: Total cards in force, which reflects the number of cards that are issued and outstanding, will likely increase in the first quarter. The Zacks Consensus Estimate for the same is 116 million up 4.5% year over year.
Higher Spending on Card Member Engagement: Spending on rewards, Card Member services and marketing and promotion expenses should show an uptick due to recent enhancements to rewards on the company’s U.S. Platinum products, continued strong growth in its Delta cobrand portfolio and higher levels of engagement in many of its premium services.
American Express Company Price and EPS Surprise
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