When American Express (NYSE: AXP) reports its earnings on Friday morning, it will provide valuable insights into recent consumer spending trends. As one of the leading financial services corporations, American Express caters to a wealthier clientele, making its earnings report a significant indicator of where the upper echelon of consumers is allocating their finances.
Analysts have high expectations for the company's fourth-quarter earnings, with a projected increase in earnings per share from $2.07 last year to $2.64. Similarly, revenue is predicted to rise from $14.18 billion in the year-ago period to $16 billion, according to FactSet.
This anticipated growth follows a solid third-quarter performance, where American Express exceeded expectations, and total card member spending witnessed a 7% increase compared to the previous year. Management highlighted the continued strength of credit quality, with net write-off and delinquency rates remaining below pre-pandemic levels. However, there was a 58% growth in the provision for credit losses during the third quarter, reaching $1.2 billion compared to the prior year. Analysts expect this provision to increase slightly further in the fourth quarter, reaching $1.41 billion.
In anticipation of the earnings report, Citi analysts expressed caution and maintained their Neutral rating on American Express stock. In their January 16 report, they increased their earnings estimates and raised the price target of shares from $154 to $200. The stock closed at around $188 on Thursday, reflecting a 21% growth over the past 12 months, aligning with the performance of the S&P 500.
The Citi analysts stated, "We expect AXP’s results and outlook to be within expectations with a little risk of slowing purchase growth."
In contrast, Deustche Bank exhibited more optimism in their report earlier this month. The bank's analysts initiated coverage of American Express shares with a Buy rating and set a price target of $235. They cited the sustainability of robust revenue growth, sterling credit, and reasonable valuation as the basis for their positive outlook.
