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Mixed Earnings From American Express (AXP.US)

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American Express (AXP.US), a US financial services company specializing in payments cards and a Dow Jones member, reported earnings for Q1 2023 ahead of the Wall Street session open today. Headline results from the company turned out to be mixed – EPS missed median estimate while revenue came in above expectations. Quick summary of American Express’ Q1 earnings:

Q1 2023 earnings highlights

  • Revenue: $14.30 billion vs $14.03 billion expected (+22% YoY)
  • EPS: $2.40 vs $2.68 expected (-12% YoY)
  • Net Income: $1.82 billion (-13% YoY)
  • Provision for Credit Losses: +$1.06 billion vs +$0.89 billion expected (-$0.03 billion in Q1 2022)
  • Total Network Volume growth: +16% YoY vs +32% YoY in Q1 2022
  • 3.4 million new cards acquired during Q1 2023

2023 full-year forecasts (unchanged)

  • Revenue growth: 15-17%
  • EPS: $11.00-11.40

As one can see there are some positives and some negatives in the release. On one hand, the company managed to boost its revenue by over 20% compared to a year ago and report a 16% YoY increase in total network volume (TNV). However, this marks quite a significant slowdown from a 32% YoY growth in TNV in Q1 2022. Also, American Express is once again making provisions for credit losses after a period of releasing them. Provision for credit losses increased by $1.06 billion in Q1 2023 as the company is experiencing higher net write-offs.

Company added 3.4 million new cards in the January-March 2023 period and said that this growth is driven by Millenial and Gen Z consumers. American Express noted that spending on Travel & Entertainment was especially robust in the quarter and increased 39% YoY. However, it should be noted that as the world was still emerging from Covid pandemic a year ago, the base effect likely played a role. Nevertheless, the company claims that consumers have been resilient so far amid deteriorating macroeconomic picture with elevated inflation and rising interest rates. As such, American Express decided to maintain its full-year forecasts issued in January and still expects 15-17% growth in revenue this year as well as EPS reaching $11.00-11.40.

Share price of American Express (AXP.US) tested resistance zone marked with 50% retracement of the February-October 2022 downward move yesterday but failed to break above. Current premarket quote points to stock launching today’s cash session slightly lower (around 1%). This would mean that the recent short-term trading range marked with 38.2 to 50% retracement may be upheld and the stock may continue to move sideways.

American Express (AXP.US) at D1 interval. Source: xStation5

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