American Express (NYSE: AXP) earnings release for the 1st quarter of their 2020 fiscal year
Category: Stock Market and American Express
Date: 25 April 2020 Stock Price: $135.11 We take a look at the 1st quarter earnings report of their 2020 fiscal year of American Express, a leading global payments company that provides personal and business credit and travel cards. The group reported that they are making provisions to write of $2.6 billion in credit losses largely due to the impact of Covid-19.
|
About American Express
American Express is a globally integrated payments company, providing customers with access to products, insights and experiences that enrich lives and build business success. The American Express Company is a multinational financial services corporation headquartered at 200 Vesey Street in the Financial District of Lower Manhattan in New York City. The company was founded in 1850 and is one of the 30 components of the Dow Jones Industrial Average
Overview of American Express' 1st quarter 2020 earnings report
Data below refers to the latest quarters data unless specified otherwise:
- Total revenues: $11.365 billion (up from $10.474 billion for the same period of the previous year)
- Revenues increased by 9% over the last 12 months
- Expenses: $8.355 billion (up from $7.629 billion for the same period of the previous year)
- Expenses increased by 9% over the last 12 months
- Net earnings: $1.693 billion (down from $2.010 billion for the same period of the previous year)
- Diluted earnings per share: $2.03 (down from $2.32 for the same period of the previous year)
- PE ratio of American Express: 16.9
- Dividend declared: $0.43 (up from $0.39 for the same period of the previous year)
- Dividend yield: 1.27%
- Diluted weighted-average shares outstanding: 816 million (down from 852 million for the same period of the previous year)
- Cash and cash equivalents: $24 billion
- Cash and cash equivalents per share: $29.41
- Cash and cash equivalents makes up 21.7% of American Express' market capital
- Cash and cash equivalents makes up 12.12% of American Express' total assets
- Card member loans: $85 billion
- Card member loans makes up 42.9% of American Express' total assets
- Stockholders equity in American Express: $23.0 billion
- Stockholders equity per share: $28.18
- So American Express is trading a 4.79 times its stockholders equity which is outside the expected range of between 2 and 4 which most firms ten to trade at.
American Express' management commentary on their 1st quarter 2020 earnings report
American Express Company (NYSE: AXP) today reported first-quarter net income of $367 million, or $0.41 per share, compared with net income of $1.6 billion, or $1.80 per share, a year ago. The evolving COVID-19 situation had significantly negative impacts on first-quarter results.
“The first two months of 2020 continued the strong momentum we have delivered over the past two years, but we’re now in a different world,” said Stephen J. Squeri, Chairman and Chief Executive Officer. “The deterioration in the economy due to COVID-19 impacts that began in the first quarter and accelerated in April has dramatically impacted our volumes. While we can’t predict just how the economy and our business will perform in the coming months, we can focus on supporting our colleagues and customers while remaining financially strong and positioning for growth when the economy begins to improve.
“In light of the current environment, we are aggressively reducing costs across the enterprise, while at the same time selectively investing in initiatives that are key to our long-term growth strategy. We entered this crisis with particularly strong capital and liquidity positions that will enable us to remain financially strong.
“The first two months of 2020 continued the strong momentum we have delivered over the past two years, but we’re now in a different world,” said Stephen J. Squeri, Chairman and Chief Executive Officer. “The deterioration in the economy due to COVID-19 impacts that began in the first quarter and accelerated in April has dramatically impacted our volumes. While we can’t predict just how the economy and our business will perform in the coming months, we can focus on supporting our colleagues and customers while remaining financially strong and positioning for growth when the economy begins to improve.
“In light of the current environment, we are aggressively reducing costs across the enterprise, while at the same time selectively investing in initiatives that are key to our long-term growth strategy. We entered this crisis with particularly strong capital and liquidity positions that will enable us to remain financially strong.
“To support our colleagues, we are committed to no COVID-19-related layoffs for the remainder of 2020 to ensure we have the right team in place to serve our customers and to continue driving our growth over the long term. And we’re supporting our colleagues in other ways, including a 100% work from home arrangement in all our locations and continuing to pay the salaries of colleagues who are affected by the virus without having to use their paid leave.
“To support our customers, we are offering consumer and small business Card Members a range of short- and long-term financial assistance programs to help them weather the storm. In addition, we are adding several new benefits, services and rewards to our premium Card products and Membership Rewards program that are relevant to the evolving needs of our customers during this time.
“For our merchants, we have extended the amount of time they have to respond to Card Member disputes, and we increased contactless transaction thresholds to reduce physical contact at the point of sale in 28 countries. “Earlier this week, we launched Stand for Small in the U.S., a coalition of more than 40 companies across various industries that have come together to back small businesses by providing a wide range of offers, complimentary services, access to corporate assistance programs and other resources designed to help support them as they manage through the crisis.
“As we manage through this period, we’ll remain focused on what we can control in the short term while keeping an eye on the long term. This has been our formula for success through difficult times in the past, and this time is no different, despite the unprecedented magnitude and uncertainty we are facing. We will continue to back our colleagues, customers, and communities, just as we have done for 170 years. And when this crisis is over, we intend to be in a position of strength, ready to capitalize on the opportunities ahead.”
“To support our customers, we are offering consumer and small business Card Members a range of short- and long-term financial assistance programs to help them weather the storm. In addition, we are adding several new benefits, services and rewards to our premium Card products and Membership Rewards program that are relevant to the evolving needs of our customers during this time.
“For our merchants, we have extended the amount of time they have to respond to Card Member disputes, and we increased contactless transaction thresholds to reduce physical contact at the point of sale in 28 countries. “Earlier this week, we launched Stand for Small in the U.S., a coalition of more than 40 companies across various industries that have come together to back small businesses by providing a wide range of offers, complimentary services, access to corporate assistance programs and other resources designed to help support them as they manage through the crisis.
“As we manage through this period, we’ll remain focused on what we can control in the short term while keeping an eye on the long term. This has been our formula for success through difficult times in the past, and this time is no different, despite the unprecedented magnitude and uncertainty we are facing. We will continue to back our colleagues, customers, and communities, just as we have done for 170 years. And when this crisis is over, we intend to be in a position of strength, ready to capitalize on the opportunities ahead.”
American Express (NYSE: AXP) stock price history
The image below, obtained from Google, shows the stock price history of American Express over the last 5 years. And it's been a pretty good time for American Express stockholders. 5 years ago the stock was trading at around $77.70 a stock and its currently trading at $83.17 a stock. That's a decent return of 7% provided to American Express stockholders over the last 5 years.
The stock of American Express is trading at a lot closer to its 52 week high of $138.13 than it is to its 52 week low of $99.38, which to us is an indication that the short term sentiment and momentum of American Express' stock is positive at this point in time.
The stock of American Express is trading at a lot closer to its 52 week high of $138.13 than it is to its 52 week low of $99.38, which to us is an indication that the short term sentiment and momentum of American Express' stock is positive at this point in time.
Searches for American Express (AXP) spiked in recent months
The image below shows the number of searches for American Express stock price compared to AXP stock price. And both search terms shows a spike in early March and reached a peak in the week of 15-21 March
The graphic below shows the search results by subregion within the United States over the last 12 months. Over the 12 month period only 14 subregions were actually interested in the stock price of American Express it seems.
Recent coverage of American Express
The extract below discusses some of the latest news regarding American Express as obtained from Thestreet.com
American Express Co. (AXP) posted stronger-than-expected first quarter earnings Friday but set aside $2.6 billion to cover bad loans and card defaults amid the coronavirus pandemic. American Express said earnings for the three months ending in March were pegged at 41 cents per shares down some 77.2% from the same period last year. Adjusted earnings, however, came in at $1.98 per share and topped the Street consensus of $1.69 per share. Group revenues, American Express said, were largely flat to last year at $10.3 billion.
The credit card provider also said it has set aside $2.6 billion in loss provisions against missed payments and defaults, a 220% increase from the first quarter of last year. However, the group said it will extend the amount of time merchants can have to address payment disputes and will offer short and long-term financial assistance to card members.
"The first two months of 2020 continued the strong momentum we have delivered over the past two years, but we're now in a different world,' said CEO Stephen. "The deterioration in the economy due to COVID-19 impacts that began in the first quarter and accelerated in April has dramatically impacted our volumes."
"In light of the current environment, we are aggressively reducing costs across the enterprise, while at the same time selectively investing in initiatives that are key to our long-term growth strategy," he added. "We entered this crisis with particularly strong capital and liquidity positions that will enable us to remain financially strong."
Read the full article here
American Express Co. (AXP) posted stronger-than-expected first quarter earnings Friday but set aside $2.6 billion to cover bad loans and card defaults amid the coronavirus pandemic. American Express said earnings for the three months ending in March were pegged at 41 cents per shares down some 77.2% from the same period last year. Adjusted earnings, however, came in at $1.98 per share and topped the Street consensus of $1.69 per share. Group revenues, American Express said, were largely flat to last year at $10.3 billion.
The credit card provider also said it has set aside $2.6 billion in loss provisions against missed payments and defaults, a 220% increase from the first quarter of last year. However, the group said it will extend the amount of time merchants can have to address payment disputes and will offer short and long-term financial assistance to card members.
"The first two months of 2020 continued the strong momentum we have delivered over the past two years, but we're now in a different world,' said CEO Stephen. "The deterioration in the economy due to COVID-19 impacts that began in the first quarter and accelerated in April has dramatically impacted our volumes."
"In light of the current environment, we are aggressively reducing costs across the enterprise, while at the same time selectively investing in initiatives that are key to our long-term growth strategy," he added. "We entered this crisis with particularly strong capital and liquidity positions that will enable us to remain financially strong."
Read the full article here
American Express (NYSE: AXP) latest stock valuation
So what is American Express stock worth based on the release of their latest earnings report? Based on American Express' latest earnings report our valuation models provide a target (full value) price of American Express stock at $144.80 a stock (up slightly from our 3rd quarter 2019 earnings review of American Express). Therefore we believe the stock of American Express is undervalued at its current price of $135.11.
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target (full value) price which in this case is $144.80, so a good entry point into American Express' stock would be at $130.30 or below.
We expect the stock of American Express to tick up in coming weeks and months to levels closer to our target price (full value price).
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target (full value) price which in this case is $144.80, so a good entry point into American Express' stock would be at $130.30 or below.
We expect the stock of American Express to tick up in coming weeks and months to levels closer to our target price (full value price).
Next earnings release date for American Express
It is expected that American Express will release their 2nd quarter 2020 earnings report will be released in late July 2020