In This Article:
A month has gone by since the last earnings report for American Express (AXP). Shares have lost about 0.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is American Express due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
American Express Q2 Earnings Beat Estimates, Decline Y/Y
American Express’ second-quarter 2020 earnings of 29 cents per share, beat the Zacks Consensus Estimate by 123%. However, the bottom line plunged 86% year over year.
The quarter also reflected softness in spending volumes as a result of the adverse COVID-19 impact.
Further, total revenues of $7.7 billion missed the Zacks Consensus Estimate by 2.5% and also declined 28.7% year over year. The top line was affected by a drop in Card Member spending and lower average discount rate.
Meanwhile, total expenses of $5.5 billion decreased 29% year over year owing to lower customer engagement costs on the back of limited Card Member spending as well as controlled usage of travel-related Card Member benefits.
Total provision of $1.6 billion soared 86% year over year as the company added $628 million to its capital reserves in a bid to strengthen its balance sheet in the light of a significant deterioration in the global macroeconomic outlook as a result of the coronavirus adversity.
Return on equity of 18.9% declined 1450 basis points year over year.
Lackluster Performance at Segments
American Express’ Global Consumer Services segment reported net income of $527 million, down 40% year over year. Total revenues, net of interest expenses of $4.6 billion decreased 23% year over year, reflecting a fall in Card Member spending and a lower average discount rate from the prior-year levels.
Global Commercial Services incurred a net loss of $60 million against net income of $561 million a year ago. Total revenues, net of interest expenses, were $2.3 billion. This, in turn, plunged 30.3% year over year, mirroring a decline in Card Member spending and a lower average discount rate.
Global Merchant and Network Services’ net income plummeted 88% year over year to $66 million in the reported quarter. Total revenues and net of interest expenses were down 41% year over year to $929 million.
Strong Financial Position (as of Jun 30, 2020)
Cash and cash equivalents were $41 billion, up 52% year over year. Total long-term debt of $49 billion was down 15.5% year over year.