Banking

Dow Giant Eyes New High On 866% EPS Spike

American Express (AXP) crushed Q2 earnings estimates early Friday, as payment volumes in the U.S. pick up amid an economic recovery. AXP stock rose before the open, signaling a record high.




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American Express Earnings

Estimates: Wall Street analysts expected American Express earnings per share to skyrocket 466% to $1.64 compared to the year-ago quarter. Revenue is seen climbing 23% to $9.47 billion.

Results: American Express earnings spiked 866% to $2.80 a share with revenue up 33% to $10.24 billion. AmEx released $866 million from credit-loss reserves, giving a big boost to results, especially EPS. A year earlier, AmEx added $1.6 billion to loss reserves.

“We saw Card Member spending accelerate from the prior quarter and exceed pre-pandemic levels in June, with the largest portion of this spending growth coming from Millennial, Gen Z, and small business customers,” said Chairman and CEO Stephen Squeri in the earnings release.

Outlook: American Express did not offer new guidance yet, except to say that it now expects to reach the high end of its original 2020 guidance next year.

Management has previously guided 2021 EPS to $6-$7.50 for 2021 and and 2022 to $8.85-$9.25. Wall Street consensus pegged American Express earnings per share at $7.63 for 2021 and $9.24 for 2022.

AXP Stock

Shares of the Dow Jones financial giant popped nearly 4% in premarket trading on the stock market today. MarketSmith chart analysis shows AXP stock is extended from a 150.55 buy point from a cup-with-handle base on a weekly chart. AXP stock recently had a new buying opportunity off the 10-week line.

AXP stock’s relative strength line is at a 52-week high. Its RS Rating is 88 out of a possible 99. Its EPS Rating is 65. 

Card payment rivals Visa (V) and Mastercard (MA) report earnings next week. Visa stock, also a Dow Jones member, edged up 0.5%. MA stock climbed 0.5%.

Counting On A Spending Rebound

American Express CFO Jeffrey Campbell told a Morgan Stanley payments conference in June that a strategy to expand its membership outreach has been key.

“In particular, when you look at our consumer business, we have been on the journey for a while now of expanding the concept of membership to evolve beyond some of its more travel-oriented focus to be more of a lifestyle focus. And I think the pandemic has only reinforced that existing strategy,” he said.

Campbell said quarter-to-date, T&E spend globally is about 50% of 2019 levels. But that’s an improvement from Q1, when it was about 60% down from 2019 levels.

He added that building out its network in China is a long-term goal.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.

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