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American Express’s Full-Year Earnings Target Remains the Same


Jul. 24 2017, Published 11:27 a.m. ET

Gaining investor confidence

In 2Q17, American Express (AXP) posted earnings per share (or EPS) of $1.47, which beats the analysts’ estimate of $1.44. This EPS reading is mostly due to increased revenues on a YoY (year-over-year) basis and the credit quality of its existing customers.

In 2Q17, American Express (or Amex) reported $8.3 billion in revenues, reflecting a 1% increase YoY, which resulted from a 6% increase in net interest income on a YoY basis.

The company’s loan portfolio witnessed 11% growth on a YoY basis, which in turn led to an increased provision for losses to $584 million. The company’s provision for losses witnessed a substantial increase of 26% YoY.

American Express (AXP) witnessed a significant increase in its expenses to $5.8 billion, reflecting a 21.0% increase on a YoY basis. The company’s expenses of $5.8 billion in 2Q17 were driven by higher cardholder reward expenses.

American Express still promises to deliver earnings per share of $5.70 in 2017, which has helped the company gain investor attention.

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Return on equity

American Express’s (AXP) return on equity on a trailing 12-month (or TTM) basis stood at ~25.1%. The return on equity readings of other consumer financial companies (XLF) on a TTM basis are as follows:

  • Visa (V): ~16.2%
  • Mastercard (MA): 75.0%
  • Discover Financial Services (DFS): 21.1%

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