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American Express: What the Second Quarter Holds

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Expected earnings

The second quarter could be beneficial for American Express (AXP), mainly because of the expected rise in consumer loans and transaction volumes as a result of lower unemployment and higher spending levels. The company could post EPS of $1.82 in the second quarter. That implies a sequential fall and a YoY (year-over-year) rise.

The YoY rise is expected to be largely due to a higher demand for consumer loans, which would boost its interest income. For EPS in the second quarter, the company has high and low estimates of $1.91 and $1.67, respectively.

American Express’s competitor (IYF) Discover Financial Services (DFS) could benefit in the second quarter from a higher retail loan demand. Capital One Financial Services (COF) is expected to benefit mainly from a boost in credit card loans, while Mastercard (MA) and Visa (V) could benefit largely from higher spending.

Performance in Q1 2018

In the first quarter, American Express rose 12% YoY in total revenues after deducting interest expense. The rise was due to strong momentum in loans, spending, and fee income. Moving forward, the company’s business would primarily be sensitive to the global trade environment and the spending behaviors of their clients.

In the first quarter, American Express’s expenses rose 9% YoY.

In this series, we’ll be looking at American Express’s expected future performance and the impact of trade wars on its business. We’ll also look at its valuations and analysts’ ratings.

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