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AmEx (AXP) Q1 Earnings Top on Higher Card Member Spending

Zacks Equity Research
Updated

American Express Company AXP reported first-quarter 2018 adjusted earnings per share (EPS) of $1.86, beating the Zacks Consensus Estimate by 8.77%. Moreover, the bottom line witnessed a marked 38% year-over-year improvement.

American Express Company Price, Consensus and EPS Surprise

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

 

Better-than-expected results were mainly backed by growth in card billed business, an increase in total cards in force, higher Card Member spending and a lower tax rate. The company continues to witness strong loan growth and credit metrics. The quarter witnessed a double-digit rise in billed business, revenues and earnings.

Delving Deeper

Revenues came in at $9.7 billion, 0.47% ahead of the Zacks Consensus Estimate of $8.72 billion. The top line increased 12% year over year on higher Card Member spending, loans and fee income plus growth across the business lines.

Provisions for loss totaled $755 million, up 35% year over year, which is attributable to growth in the loan portfolio and an increase in the lending write-off and delinquency rates.

Total expenses of $6.9 billion increased 9% year over year due to an increase in rewards expenses and other costs associated with increased Card Member spending, higher usage of card benefits and continued investments in cobrand partnerships.

The effective tax rate was 22%, denoting a fall from 32% in the year-ago quarter, courtesy of the tax reform.

Segment Results

American Express’ U.S. Consumer Services segment reported net income of $640 million, up 30% year over year. Total revenues, net of interest expense of $3.7 billion, were up 13% year over year, reflecting higher loans and Card Member spending as well as benefit of the Hilton portfolio acquisition.

International Consumer and Network Services’ net income amounted to $291 million, up 15% year over year. Total revenues, net of interest expenses, climbed 12% (on a currency adjusted basis) year over year to $1.8 billion, primarily on the back of higher Card Member spending and net card fees.

Global Commercial Services’ net income of $552 million surged 35% year over year. Total revenues, net of interest expenses, increased 9% year over year to $3 billion, primarily reflecting higher Card Member spending.

Global Merchant Services’ net income rose 32% year over year to $472 million in the reported quarter. Total revenues, net of interest expenses, increased 10% year over year to $1.2 billion on higher Card Member spending, partially offset by a lower discount rate.

Corporate and Other reported net loss of $321 million, wider than $261 million loss incurred in the year-ago quarter.

2018 Guidance

Based on first-quarter results and solid trends for the remaining year, the company foresees full-year earnings per share at the high end of $6.90-$7.30 range. Revenues are expected to increase at least 8%.

Zacks Rank

American Express carries a Zacks Rank #3 (Hold).

Other Upcoming Releases

Here are some other stocks, poised to beat on earnings this quarter owing to a strong Zacks Rank as well as a positive Earnings ESP:

CIT Group Inc. CIT is set to report first-quarter earnings on Apr 24. the company has an Earnings ESP of +1.54% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moody's Corporation MCO is set to report first-quarter earnings on Apr 27. It has an Earnings ESP of +1.49% and a Zacks Rank #2 (Buy).

MoneyGram International Inc. MGI is set to report first-quarter earnings on May 3. This Zacks #3 Ranked stock has an Earnings ESP of +5.88%.

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Moody's Corporation (MCO) : Free Stock Analysis Report
 
MoneyGram International Inc. (MGI) : Free Stock Analysis Report
 
American Express Company (AXP) : Free Stock Analysis Report
 
CIT Group Inc. (CIT) : Free Stock Analysis Report
 
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