Earnings Preview: American Express 2 comments
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American Express (AXP) is expected to report Q3 earnings after market close Monday, Oct. 20, with a conference call scheduled for 5:00 pm.
Guidance
Analysts are looking for EPS of 59c on revenue of $7.31B. The consensus range for EPS is 33c to 71c, while the consensus range for revenue is $6.91B to $7.79B, according to First Call.
Analyst Views
Friedman Billings Ramsey recently reduced its 2008 earnings estimate for American Express to $2.67 from $2.93, and the firm lowered its target for the stock to $28 from $32. Friedman Billings Ramsey believes that the credit card issuer will be hurt by higher funding costs triggered by tightening credit markets. In addition, the firm thinks that American Express is more vulnerable than its peers to credit market fluctuations because its deposit base is smaller than those of other card issuers.
Earlier this month the company reported that it had suspended its share buyback program in order to increase its capital levels. The card issuer also announced that as of September 30 it had raised $23B of the $27B in debt it plans to issue this year. On a positive note, American Express investors may be encouraged because Capital One (COF) reported EPS late yesterday that was only 1c below the consensus estimate.
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This article has 2 comments:
American Express' model is spend-centric. While they don't discourage customers from carrying a balance, their model centers on getting them to spend big and capturing the economic value from the interchange fees. Their superprime customers are less likely to carry large balances over long terms anyway.