American Express Earnings Preview: AXP to Give Insights into Consumer Health
American Express Earnings Preview: AXP to Give Insights into Consumer Health
- American Express to report earnings on Friday, October 17.
- The market is watching the report to help gauge consumer spending habits.
- Options market shows an expected move of +/-13.68 points, or 4.11% of the stock price.
American Express earnings to help guide view on state of U.S. economy
American Express (AXP) will announce fiscal third-quarter results on Friday, October 17, before the market open. Market participants will review the earnings numbers not only to gauge the health of American Express itself, but to get a feel for how consumer spending and credit habits are being shaped amid an uncertain economic backdrop. Big banks reported earlier this week and provided mostly positive results.
Last quarter, AXP reaffirmed its full-year guidance on earnings per share (EPS) and revenue, and reported a quarterly high for card member spending, rising 7% over the past year. The stock is up about 12% since the start of the year, which is slightly below the S&P 500’s performance of +13.73% over the same period.
While beating EPS and revenue estimates will be important for AXP, investors are also going to dig into its metrics on credit quality to help assess the broader state of the U.S. economy.
Last quarter, AXP reported that its 30-day delinquency rate was at 1.3% for Gen-X and Baby Boomers and 1.9% for Millennials and Gen-Z. Those figures were both below the industry average, underscoring the health of its client base. Net write-offs fell to 2% from 2.1% in the second quarter. Investors will want to see these figures to stay the same, or more preferably fall from the prior quarter.
What do investors expect?
According to TradingView, investors expect AXP to report EPS of $4.00 on $18.05 billion in revenue. That would compare to EPS of $3.49 on $16.64 billion in revenue a year ago. Last quarter, AXP reported EPS of $4.08 on $17.86 billion in revenue.
The credit card company has put in a solid track record for beating estimates over the past year, surpassing EPS estimates in the four previous quarters and revenue in three of the last four.
Trading AXP earnings
American Express traded with an implied volatility rank (IVR) of 26.9 on Wednesday, October 15. The stock is up about 0.4% since the start of the month, putting it ahead of the Financial Select Sector SPDR Fund (XLF), which contains a basket of banks and financial product services.
AXP is trading above its 9- and 21-day exponential moving averages (EMAs) after it briefly fell below its 50-day simple moving average (SMA) last week during a market-wide sell off. Currently, AXP is trading about 4.5% below its all-time high of 349.19 from September, which could pose some resistance to prices if a positive earnings report sends the stock higher.
The options on AXP show an expected move of +/-13.68 points, or 4.11% of the stock price, which is slightly below the average 5% to 10% move for S&P 500 companies. If traders believe that AXP will remain in the expected move, they could express the view by employing an iron condor with the short options just outside or beyond the expected move range.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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