American Express Earnings Preview (NYSE: AXP) – Results Due Before Open

American Express Company (AXP) is set to release its third-quarter earnings report this morning (Fri 17th), before the market opens. The markets are keenly awaiting the earnings announcement, seeking clarity on the company's performance amidst a complex landscape that has led American Express' stock 3.83% lower over the past month.

Analysts expect the company to report an EPS of $4.00 for the upcoming quarter, representing a strong increase from the same period Y/Y ($3.49). Revenue is projected to reach $18.05 billion, reflecting an 8.49% growth compared to the same period last year.

This expectation comes on the heels of a strong second quarter, where American Express reported a net income of $2.9 billion, or $4.08 EPS, a 17% jump year-over-year excluding a one-time gain. Total revenues net of interest expense reached a record $17.9 billion, climbing 9% year-over-year. The growth in Q2 was attributed to increased card member spending, higher net interest income, and robust card fee growth.

While the prevailing sentiment surrounding American Express remains largely positive, taking a look at the bear side is worthwhile. The company's reliance on affluent customers, while a strength in many ways, also presents a vulnerability. A correction in the stock market, for instance, could disproportionately impact this demographic, leading to a sharp decline in spending and, consequently, American Express's revenue.

Furthermore, the projected earnings growth may be overly optimistic. The current economic environment is characterized by uncertainty, with rising inflation and geopolitical risks potentially dampening consumer sentiment. While American Express has demonstrated resilience in the past, it is not immune to broader macroeconomic forces.

Looking back at previous reports for clues, American Express has shown a mixed performance in recent years. In the second quarter of 2024, the company reported a 9% increase in revenue to a record $16.33 billion, yet this fell short of expectations, causing a 4.4% drop in shares. In contrast, the first quarter of 2024 saw a 34% increase in profits, driven by higher spending and increased interest income.

As American Express prepares to unveil its Q3 earnings, one should focus on key indicators such as card member spending, net interest income, and provisions for credit losses. Any deviations from expectations could trigger a reaction from markets.

Furthermore, one should pay close attention to the company's guidance for the remainder of the year. A revision of the full-year outlook could signal a shift in the company's prospects and impact its stock price.