AmEx (AXP) shows strength so far in Q4 and issues long-term view


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American Express CompanyAXP management remains optimistic about the strong results for the fourth quarter of 2021, supported by strong commercial results for the months of October and November 2021. AXP therefore remains confident about the momentum to be maintained in 2022 and has also expressed certain long term views.

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It’s worth mentioning that October and November results have already beaten better-than-expected American Express figures released in the third quarter of 2021. In the third quarter, AXP reported earnings of $ 2.27 per share , exceeding Zacks’ consensus. Estimate of 27.5% and jumped 75% year over year. Total net interest expense of $ 10.9 billion exceeded the consensus mark of 3.6% and improved 25% year over year.

The first line of American Express has been hit hard by the volatilities induced by COVID-19 in 2020. Due to the transmission risks induced by the COVID-19 pandemic, severe restrictions have been imposed on domestic and cross-border travel. This has plagued AXP, as a significant portion of its revenue comes from the Travel and Entertainment (“T&E”) segment. Although the woes of the pandemic continue to persist, the global economy appears to be breaking out of the woods and previously imposed travel bans continue to be relaxed somewhat. This should pave the way for increased consumer spending and a resumption of business activities. Cardholder spending hit an all-time high in the third quarter of 2021.

American Express revenue for the month of October was 8% higher than the figures reported during the pre-pandemic period of 2019. This definitely signals a turnaround for the business of financial services provider Zacks Rank # 3 (Hold) . A gradual economic recovery also keeps AXP management confident in its commercial strength for 2022.

However, one issue that continues to offset the growth of American Express is the moderate recovery in the travel industry. Although T&E spending in the third quarter of 2021 more than doubled from the 2020 level, it remained 29% lower than reported in the pre-pandemic era.

Long term outlook

In the long term, American Express management assumes travel will rebound to pre-pandemic levels as demand for recreational tours remains suppressed. Business travel is also set to pick up completely. This could lead to an increase in T&E expenses, thus benefiting AXP’s top line.

Other factors contributing to growth

American Express continues to implement a series of measures focused on technological advancements, the introduction of secure digital solutions and assistance to businesses in the regulation of payments. These initiatives have strengthened the digital suite and global footprint of the financial services provider. AXP has shown its commitment to deploying innovative card offerings and upgrading existing cards to meet the evolving needs of its cardholders.

A strong cash position provides American Express with sufficient cash reserves to service debt. AXP Express has strong cash-generating capabilities, which allow it to pursue significant business investments and tactical shareholder-friendly initiatives through share buybacks and dividend payments.

Besides American Express, other companies like Embedded Mastercard MA and Western Union company WU also remains confident about the healthy business outlook for 2021. This is clearly reflected in the strong forecasts issued by the aforementioned companies for either the fourth quarter of 2021 or for the full year.

Mastercard continues to benefit from revenue growth, several acquisitions and collaborations with several local and globally renowned organizations, which have enhanced its capabilities and strengthened its global footprint. MA has made significant investments to upgrade digital capabilities. For the fourth quarter of 2021, Mastercard predicts that net income will see growth in the mid-20s year over year.

Western Union prides itself on a strong digital branch, which it has built on the back of several digital partnerships and significant investments. For 2021, management expects earnings per share to be between $ 2.05 and $ 2.10, higher than previous forecasts by $ 2 to $ 2.10. The midpoint of the revised forecast shows 11% growth from the figure released at the end of 2020. The company expects constant currency revenue growth of around 3-4% for 2021 compared to the previous outlook for a “Average single-digit increase” (compared to a 3% decrease in 2020).

American Express shares gained 42.3% year-on-year compared to industry growth of 25.3%.

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While shares of Mastercard rose 0.3% in one year, shares of Western Union lost 26.2% in the same period.

A stock to consider

A better ranked player in the financial space understands The Blackstone Group Inc. BX, which sports a rank 1 of Zacks (strong buy). You can see The full list of today’s Zacks # 1 Rank stocks here.

New York-based Blackstone is a renowned investment firm with assets under management (“AUM”) of $ 730.7 billion as of September 30, 2021. A diverse product line, revenue mix and superior position in the space of alternative investments are likely to continue to support the growth of assets under management. The scale, the diversified activities, the sustained track record of strong investment performance and strong client relationships prepare the investment company for optimal growth in the days to come.

BX’s net profit for 2021 has seen five upward revisions to estimates in the past 60 days and no movement in the opposite direction. During that time, his profit estimates rose 17.6%. Blackstone has beaten earnings estimates in each of the past four quarters, the average surprise being 23.74%.

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