Global electronic payment processor -
American Express Co.
) or AmEx is scheduled to release second-quarter 2014 financial
results after the closing bell on Jul 29.
In the last reported quarter, the company delivered a positive
earnings surprise of 2.3%, while the four-quarter trailing average
beat is pegged at 2.2%. Let us see how things are shaping up for
Our proven model shows that AmEx is not likely to beat earnings
as it lacks the required combination of two key components.
: The Most Accurate estimate of $1.38 per share is at par with the
Zacks Consensus Estimate of AmEx. Hence, the Expected Surprise
, which is the difference between the aforementioned estimates,is
: AmEx has a Zacks Rank #2 (Buy). Note that stocks with Zacks Rank
#1, 2 and 3 have significantly higher chances of beating earnings.
Sell-rated stocks (#4 and 5) are never considered going into the
Though AmEx's Zacks Rank #2 increases the predictive power of
ESP, the company's nil ESP makes surprise prediction difficult.
What is Directing an Indifferent Earnings?
On the financial front, AmEx retains adequate liquidity, which
is also reflected in its superior capital ratios and ability to
return excess capital through incremental share repurchases and
dividends, overall resulting in an above-average payout ratio.
A diversified portfolio and higher spending on the company's
cards have helped improve operations and default rates in the past
quarters. With 1% year-over-year rise in expenses in 2013 and
first-quarter 2014, management expects to limit annual operating
expenses to less than 3% in 2014. AmEx is also expected to benefit
from the recent strategic alliances and divestments. These are
likely to strengthen the company's network and global position.
However, AmEx faces significant challenges from regulations,
litigations and stiff competition. Notably, any adverse outcome of
the ongoing litigation by the U.S. Department of Justice (DoJ) may
weigh on the company's financials. All these potential risks
currently keep us at bay.
Other Stocks to Consider
Here are some other companies you may want to consider as our
model shows that these have the right combination of elements to
post an earnings beat this quarter:
Qiwi Plc (
) has Earnings ESP of 4.8% and a Zacks Rank #1 (Strong Buy).
Mercury General Corp. (
) hasEarnings ESP of +14.9% and a Zacks Rank #1.
Moody's Corp. (
) has Earnings ESP of +6.1% and a Zacks Rank #3 (Hold).
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AMER EXPRESS CO (AXP): Free Stock Analysis
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