American Express' (AXP) Billings, Loans to Aid Q1 Earnings

American Express Company’s AXP first-quarter 2018 results should see upside from accelerated growth in billings and continued strong growth in loans and fees. The company’s global commercial and global consumer segments represents 40% and 43% of billings, respectively, and Global Network Services makes up the remaining 17% of billings.

In the fourth quarter, the company had witnessed record billings and strong loan growth, which helped drive a 10% increase in revenues. Card Member spending grew 11% with strong momentum across each of its business segments. Loans grew 14% in the fourth quarter while credit metrics remained strong.

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 too. 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. The Zacks Consensus Estimate for card billed business is $275 billion, up 9.1% year over year.

Per a William Blair analyst, American Express is seeing strong Business to Business billings growth, which is poised to accelerate further given the massive underpenetrated market and its unique service offerings generated from its data analytics capabilities, relationship network across the supply chain, and integrated payments platform.

Increase in Loan and Recievables:  Card Member loan and receivables growth should be seen as the company continues to expand its relationships with existing customers and acquires new Card Members. This should have, however, led to an increase in provisions for losses, lending delinquencies and net write-off rates. The increases in the 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.

Earnings Surprise History

The company boasts an impressive earnings surprise history. It beat estimates in each of the four reported quarters, with an average positive earnings surprise of 2.5%.

American Express Company Price and EPS Surprise

 

American Express Company Price and EPS Surprise | American Express Company Quote

Zacks Rank and Other Stocks

American Express carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are American Financial Group, Inc. AFG, Aflac Incorporated AFL and CME Group Inc. CME. Each of these carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

American Financial reported four reported quarters average surprise of 26.31%.

Aflac reported four reported quarters average surprise of 5.81%.

CME Group four reported quarters average surprise of 2.41%.

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