American Express Expected to Beat Revenue and Earnings Estimates in Q3 2023

American Express (AXP) is set to release its fiscal Q3 2023 results on October 20, 2023. Analysts anticipate that the credit card giant will surpass consensus estimates for both revenues and earnings. In the previous quarter, American Express reported mixed results, with earnings surpassing expectations while revenues fell short, despite a 12% year-over-year growth.

The company’s top line was influenced by higher interest rates and revolving loan balances, along with an increase in billed business, processed volumes, and premium card portfolios. The expectation is that the third-quarter results will follow the same trend. A more detailed analysis can be found in our interactive dashboard analysis on American Express’ Earnings Preview.

Despite the current financial environment, AXP stock has exhibited significant gains, rising 30% from $120 in early January 2021 to around $155 currently, compared to a 15% increase in the S&P 500 over approximately the same period. However, the upward movement of AXP stock hasn’t been consistent. It posted returns of 35% in 2021, -10% in 2022, and 3% in 2023. In comparison, the S&P 500 recorded returns of 27% in 2021, -19% in 2022, and 14% in 2023, indicating that AXP underperformed the index in 2023.

Beating the S&P 500 consistently has been challenging for individual stocks in recent years, including heavyweights in the Financial sector such as Visa (V), JPMorgan Chase (JPM), and Mastercard (MA), as well as megacap stars Google (GOOG), Tesla (TSLA), and Microsoft (MSFT). On the other hand, the Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, has outperformed the S&P 500 annually over the same period. The HQ Portfolio stocks have provided superior returns with less risk compared to the benchmark index, as evidenced by their performance metrics.

Considering the current uncertain macroeconomic environment characterized by high oil prices and elevated interest rates, it remains to be seen whether AXP will face a similar situation as it did in 2023 and underperform the S&P 500 over the next 12 months, or if it will experience a strong rebound. According to our forecast, American Express’ valuation is $182 per share, which is 19% above the current market price of around $153.

In terms of earnings estimates for FY2023Q3, we expect American Express’ revenues to slightly outperform the consensus estimate. The company’s revenues grew 17% year-over-year to $29.34 billion in the first two quarters of 2023. Trefis estimates that American Express’ fiscal Q3 2023 revenues will be approximately $15.45 billion, slightly above the consensus estimate of $15.37 billion.

Regarding earnings per share (EPS), American Express is expected to surpass the consensus estimate for Q3 2023. Trefis analysis indicates that the adjusted earnings per share for the quarter will be $2.98, almost 1% above the consensus estimate of $2.94. The adjusted net income for the first six months of FY 2023 decreased by 2% year-over-year to $3.99 billion due to significant provisions for credit losses. It is expected that the same trend will drive the third-quarter results.

Overall, American Express is expected to report an annual GAAP EPS of $11.13 in FY2023.

Based on an EPS estimate of approximately $11.13 and a price-to-earnings (P/E) multiple of just above 16x for fiscal 2023, we arrive at American Express’ valuation of $182 per share. This represents a 19% increase from the current market price.

Note: P/E multiples are based on the share price at the end of the year and reported or expected adjusted earnings for the full year.

AXP’s return has been compared to the Trefis Reinforced Portfolio, which has consistently outperformed the market. Investors can learn more about the market-beating portfolios offered by Trefis by visiting the Trefis website.