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4 American Express Analysts Break Down Q2 Earnings

Benzinga2021-07-27

Following American Express Co’s (NYSE:AXP) second-quarter earnings beat Friday, analysts from Barclays, Credit Suisse, RBC, and BMO provided key takeaways and revised forecasts.

The Barclays View

American Express had a solid second quarter driven by improving the credit environment and U.S. consumer spending trends, said analyst Mark DeVries in a Monday note.

American Express’s credit performance has consistently improved year-to-date, with the company’s credit reserves and capital levels looking like they will normalize faster than peers, said DeVries. U.S. consumer spending is at 98% of pre-pandemic levels and is expected to continue to grow, said the analyst.

The company’s EPS beat of $2.80 blew the bank’s $1.62 expectations out of the water, primarily driven by an $866-million capital reserve release and better-than-expected revenues, he said.

Despite the positives coming out of second-quarter results, American Express trades at a relatively high valuation, DeVries noted. The company trades at 19x expected 2022 EPS estimates, a “significant premium” to historical multiples and where peer card issuers trade, the analyst said.

DeVries maintained an Equal Weight rating on American Express and raised the price target from $155 to $166, based on an 18x multiple on expected 2022 EPS.

The Credit Suisse View

Overall, American Express’s second-quarter results were positive, yet the company is still lagging behind peers, said analyst Moshe Orenbuch.

The company did book better-than-expected billed business revenue, and travel and expense spending recovered faster than expected, yet the category growth underperformed competitors, said the analyst.

Two key positives drawn from the earnings call were that the bank is accelerating its share buyback and that card fees came in at $1.29 billion, demonstrating that demand for American Express’s premium-based fee products is accelerating, said the analyst.

Credit Suisse estimates for expected 2022 EPS were revised higher than guidance from $8.70 to $9.30 following the call, said the analyst.

Longer-term, Orenbuch maintains an Underperform rating with a price target increase from $135 to $150, based on a 16x multiple on expected 2022 EPS.

The RBC View

American Express’s second quarter was strong, driven by a spending rebound, said analyst Jon Arfstrom.

The earnings call showed improving trends in credit quality, fee revenues, card member loan revenues, and both T&E and non-T&E billings, said the analyst.

Management expected these trends to continue to benefit the company from now through the end of 2022, with T&E spending expected to close in on pre-pandemic levels, said Arfstrom.

The strong growth in those categories came with a 25.7% increase in customer-related and marketing expenses, said the RBC analyst.

The analyst revised 2022 EPS estimates from $9.15 to $9.25.

Longer-term, Arfstrom maintains a Sector Perform rating, lowering the price target from $185 to $174, reflective of an expected 2022 EPS multiple contraction from 20x to 19x.

The BMO View

BMO analyst James Fotheringham provided a brief update on the company following earnings.

The reported revenue and credit beats led the analyst to raise forward expectations by 15% due to increased future revenue and lower provisions estimates, according to the analyst.

American Express’s 51% increase in card volume and year-ove-ryear card acquisition doubling “surprised positively,” said Fotheringham.

Despite this quarter’s positives, the company’s expected 2022 EPS estimates are a little stretched given the ongoing T&E headwinds, said the analyst.

Fotheringham maintained the bank’s Market Perform rating, increasing the price target from $135 to $151.

AXP Price Action: American Express was down 0.33% at $172.61 at last check Monday.

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Comment4

  • TonySiang
    ·2021-07-27
    Hmmm....
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  • YTRT
    ·2021-07-27
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  • MikeSeah
    ·2021-07-27
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  • cheehoung
    ·2021-07-27
    OK?
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    • DaDuck
      ok
      2021-07-27
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    • GuSenReplying toDaDuck
      Never leave home without it
      2021-07-27
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    • RXX
      Ok
      2021-07-27
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