Is AmEx Stock a Buy Ahead of Q1 Earnings? Key Factors to Watch

Core Viewpoint - American Express Company (AXP) is expected to report first-quarter 2025 results on April 17, 2025, with earnings estimated at $3.46 per share and revenues of $17 billion, reflecting year-over-year growth in both metrics [1][2]. Earnings Estimates - The Zacks Consensus Estimate for first-quarter earnings indicates a year-over-year increase of 3.9%, while revenues are projected to grow by 7.6% [2]. - For the current year, the revenue estimate stands at $71.5 billion, implying an 8.4% rise year-over-year, and the EPS estimate is $15.24, suggesting a 14.2% increase [3]. Recent Performance - American Express has consistently beaten consensus earnings estimates in the last four quarters, with an average surprise of 6.9% [3]. Earnings Prediction Model - Current indicators suggest uncertainty regarding an earnings beat, with an Earnings ESP of -0.40% and a Zacks Rank of 3 (Hold) [4]. Factors Influencing Q1 Results - A rise in network volumes is anticipated, driven by resilient consumer spending among AXP's premium customer base, with a projected 6.1% year-over-year growth in total network volumes [6]. - Discount revenues are expected to grow by 5% year-over-year, supported by increased network volumes [7]. - Growth in cards-in-force is projected at 4.5% year-over-year, with Average Card Member loans expected to rise by 10.6% [8]. - Interest income is likely to increase by 5.2% from the previous year, reflecting higher loan receivables [9]. Expense Considerations - Rising expenses in card member services, marketing, and salaries may limit margin growth, with increased client engagement costs anticipated due to higher spending and travel-related benefits [10]. - Pre-tax income from Global Merchant and Network Services is expected to decline by 3%, and U.S. Consumer Services is projected to fall by 5.4% year-over-year, adding to the uncertainty of an earnings beat [11]. Stock Performance and Valuation - AXP's stock has declined by 13.9% year-to-date, outperforming the industry's decline of 18.5% [12]. - Currently, AXP trades at 16.08X forward 12-month earnings, above the industry average of 13.97X, indicating it may be overvalued compared to its peers [15]. Market Context - The company operates in a different model compared to Visa and Mastercard, taking on full credit risk while serving an affluent customer base [17]. - Expectations of rate cuts could impact banking margins but may also boost consumer spending and swipe fee revenue [18]. - Near-term challenges include rising expenses and greater exposure to U.S. economic shifts compared to global competitors [19]. Investor Sentiment - Steady operations and customer resilience are seen as positive for current shareholders, while new investors may consider waiting for a more favorable entry point due to potential regulatory changes and spending shifts [20].