American Express (AXP) Q2 Earnings Beat, Revenues Rise Y/Y

American Express Company AXP reported second-quarter 2021 earnings of $2.80 per share, which outpaced the Zacks Consensus Estimate by 70.7%. The bottom line increased to nearly ten-fold from the prior-year quarter.

The company’s results were driven by growing revenues and strong segmental performances, partly offset by escalating costs.

In the quarter under review, the company’s total revenues net of interest expense improved 33% year over year to $10.2 billion. The upside can be attributed to higher Card Member spending and improved average discount rate. Rise in the average discount rate was owing to increased travel and entertainment spending across the United States. The top line beat the Zacks Consensus Estimate by 8.1%.

Total expenses of American Express climbed 44% year over year to $7.9 billion in the second quarter. The increase has been mainly due to uptick in customer engagement costs, which resulted from rise in Card Member spending, increased marketing investments undertaken as part of growth initiatives and extended travel-related Card Member benefits utilization.

Provision for credit losses amounted to a benefit of $606 million compared with year-ago quarter’s provision expense of $1.6 billion.

Return on equity expanded 1,240 basis points (bps) year over year to 30.5% in the quarter under review.

American Express Company Price, Consensus and EPS Surprise

American Express Company Price, Consensus and EPS Surprise

American Express Company price-consensus-eps-surprise-chart | American Express Company Quote

Segmental Performances

Global Consumer Services Group segment recorded pretax income of $1.9 billion in the second quarter, which more than doubled year over year. Total revenues net of interest expense advanced 28% year over year to $6 billion, courtesy of rise in Card Member spending.

Global Commercial Services segment delivered pretax income of $839 million, against the prior-year quarter’s pretax loss of $22 million. Total revenues net of interest expense was $3 billion, which climbed 35% year over year attributable to higher Card Member spending.

Global Merchant and Network Services segment reported pretax net income of $527 million, which has increased to nearly three-fold year over year. Total revenues net of interest expense surged 47% year over year to $1.2 billion primarily driven by growing network volumes.

Corporate and Other posted second-quarter pretax loss of $308 million, which came in narrower than the prior-year quarter’s pretax loss of $387 million.

Strong Financial Position (as of Jun 30, 2021)

American Express exited the second quarter with cash & cash equivalents of $31 billion, which plunged 26% year over year.

As of Jun 30, 2021, the company’s long-term debt was $37 billion, down 24% year over year.

Zacks Rank

American Express presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Finance Sector Releases

Of the finance sector players that have reported second-quarter results so far, the bottom-line results of Synchrony Financial SYF, Discover Financial Services DFS and Capital One Financial Corporation COF beat the respective Zacks Consensus Estimate.

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