Will American Express (AXP) Surprise this Earnings Season? - Analyst Blog

Global electronic payment processor - American Express Co.AXP or AmEx is scheduled to release first-quarter 2014 financial results after the closing bell on Apr 16, 2015.

In the last reported quarter, the company delivered a positive earnings surprise of 0.7%, while the four-quarter trailing average beat is pegged at 2.8% with positive surprises in all four quarters of 2014. Let us see how things are shaping up for this announcement.

Earnings Whispers

Our proven model shows that AmEx is not likely to beat earnings as it has the required combination of two key components.

Zacks ESP : The Most Accurate estimate of $1.37 per share is at par with the Zacks Consensus Estimate of AmEx. Hence, the Expected Surprise Prediction or Earnings ESP , which is the difference between the aforementioned estimates,is 0.00%.

Zacks Rank : AmEx has a Zacks Rank #3 (Hold). This increases the predictive power of ESP. However, we need a positive ESP to be confident about an earnings beat. Hence, the combination of AmEx's Zacks Rank #3 and 0.00% ESP deters us from making a conclusive outcome.

Note that stocks with Zacks Ranks #1 (Strong Buy), #2 (Buy) and #3 (Hold) have a significantly higher chance of beating earnings.

Conversely, Sell-rated stocks (#4 and 5) should never be considered going into the earnings announcement, especially when the company is witnessing a negative estimate revisions momentum.

Factors at Play

While AmEx's capital remains healthy, the possibility of below-average long-term growth in 2015 due to rise in expenses, loan loss provisions, foreign currency fluctuation and pressured discount rate in Europe raise concerns. Moreover, charge-offs and delinquencies will likely begin to increase from historical lows in 2015.Some ripple effects of these growth laggards may affect the first quarter as well.

The adverse impact of the low interest rate environment may hinder returns from investment securities and growth from loan fee income and bank deposits. Nevertheless, AmEx's spend-centric business model, strategic initiatives in the digital payments space and new card-issuing alliance with BBVA Compass and NBA continue to augur growth. The approval for new share repurchases and dividend hike also boost shareholder confidence.

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:

Santander Consumer USA Holdings Inc. SC has an Earnings ESP of +11.1% and a Zacks Rank #1.

PartnerRe Inc. PRE hasanEarnings ESP of +9.1% and a Zacks Rank #3.

MasterCard Inc. MA has an Earnings ESP of +1.25% and a Zacks Rank #3.

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MASTERCARD INC (MA): Free Stock Analysis Report

AMER EXPRESS CO (AXP): Free Stock Analysis Report

PARTNERRE LTD (PRE): Free Stock Analysis Report

SANTANDER CNSMR (SC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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