Quarterly results from several of the major credit card companies will be a highlight of this week’s earnings lineup with a spotlight on American Express (AXP)  in particular.Hitting fresh 52-week highs of $319 a share on Tuesday, AXP has soared over +70% in the last year. This has impressively outperformed the broader indexes and many of its credit card peers including Capital One’s (COF)  +49% and Mastercard’s (MA)  +20%.That said, let’s see if the surge in American Express stock can continue as its Q4 ea ...

Core Viewpoint - The 2024 Q4 earnings season is underway, with Discover Financial Services (DFS) and American Express (AXP) among the notable companies reporting, both of which have significantly outperformed the S&P 500 over the past year [1][2][14]. Group 1: Discover Financial Services (DFS) - Analysts expect DFS to report an EPS of $3.15, reflecting a 14% increase over recent months and a substantial 100% year-over-year growth [5]. - The Zacks Consensus estimate for DFS's net interest income is $3.6 billion, which is a 3% increase from the previous year's $3.4 billion, with the company having a history of exceeding expectations in this area [6]. - DFS's current forward 12-month earnings multiple is 14.5X, indicating a 35% discount compared to the S&P 500, and the PEG ratio stands at 1.1X, suggesting a fair price for the anticipated growth [6][7]. Group 2: American Express (AXP) - AXP's EPS is projected at $3.03, which is a 3% increase over recent months and indicates a 15% year-over-year growth [8]. - The Zacks Consensus estimate for AXP's net interest income is $4.1 billion, representing a 15% increase from the previous year, with AXP also having a strong track record of positive surprises in this metric [10]. - AXP's Q3 sales reached $16.6 billion, marking the tenth consecutive period of record sales, with Q4 sales forecasted at $17.2 billion, reflecting an 8.8% year-over-year growth [11][12].

Core Viewpoint - American Express Company (AXP) has significantly outperformed its industry and broader market indices over the past year, driven by strong consumer spending and travel demand, alongside robust digital services and cash generation capabilities [1][2]. Group 1: Financial Performance - AXP shares have increased by 69% in the past year, compared to the industry's growth of 22.3%, the Finance sector's 25%, and the S&P 500's 24.8% [1]. - The Zacks Consensus Estimate for AXP's 2025 earnings is $15.24 per share, reflecting a 13.7% increase from the 2024 estimate, with revenues projected at $71.5 billion, indicating an 8.5% growth from 2024 [4]. - AXP has a strong earnings surprise history, beating estimates in three of the last four quarters with an average surprise of 6.53% [2]. Group 2: Revenue Growth Drivers - The company is experiencing robust revenue growth primarily due to increasing discount revenues, which are a significant part of its income, and rising consumer spending that enhances Card Member activity [5]. - The resurgence in travel demand is expected to further boost service fees and other revenue streams, with long-term revenue growth anticipated at 10% [5]. Group 3: Strategic Initiatives - AXP is enhancing its presence in the premium consumer market by offering improved membership benefits that cater to everyday expenses, borrowing needs, and travel requirements [6]. - The company is committed to innovation, investing in new product launches and upgrades to existing offerings, which are crucial for maintaining high Card Member retention [7]. - AXP has strengthened its digital solutions and services to remain competitive, while also implementing robust fraud prevention measures to protect customers [7]. Group 4: Financial Health and Shareholder Returns - AXP maintains a strong liquidity position with a healthy cash balance sufficient to cover short-term debt obligations, enabling significant investments and shareholder returns [8]. - The company announced a 17% increase in its quarterly dividend in March 2024 and generated $8.3 million in net cash from operations during the first nine months of 2024 [8].

Core Insights - American Express (AXP) is expected to report quarterly earnings of $3.03 per share, reflecting a year-over-year increase of 15.7% [1] - Revenues are projected to be $17.19 billion, up 8.8% from the same quarter last year [1] - Analysts have revised their consensus EPS estimate upward by 1% over the past 30 days, indicating a positive reassessment of the company's performance [1] Earnings Estimates - The consensus estimate for 'Total Card Member loans' is $140.03 billion, compared to $126 billion in the same quarter last year [6] - Analysts forecast 'Commercial Services - Card Member Loans - Total loans' to reach $30.48 billion, up from $25.8 billion year-over-year [4] - 'U.S. Consumer Services - Card Member loans - Total loans' is estimated at $91.00 billion, compared to $83.2 billion last year [4] Key Metrics Projections - 'International Card Services - Card Member loans - consumer and small business - Total loans' is expected to be $18.56 billion, up from $17 billion year-over-year [5] - The average prediction for 'Average Card Member loans' is $136.84 billion, compared to $121.8 billion last year [5] - 'Card billed business (Network volumes)' is projected to reach $458.67 billion, an increase from $434.4 billion in the previous year [6] Revenue and Income Estimates - 'Total non-interest revenues' are expected to be $13.07 billion, compared to $12.20 billion last year [7] - 'Net Interest Income' is projected at $4.12 billion, up from $3.60 billion in the same quarter last year [7] - 'Discount revenue' is estimated to be $9.11 billion, compared to $8.58 billion last year [7] Additional Financial Metrics - 'Net card fees' are expected to reach $2.26 billion, up from $1.91 billion year-over-year [8] - 'Processed revenue' is projected at $417.38 million, slightly up from $414 million in the same quarter last year [8] - American Express shares have increased by 4.7% in the past month, contrasting with the S&P 500 composite's decline of 0.4% [9]

The most recent trading session ended with American Express (AXP) standing at $297.02, reflecting a +1.27% shift from the previouse trading day's closing. The stock outpaced the S&P 500's daily gain of 0.16%. At the same time, the Dow added 0.86%, and the tech-heavy Nasdaq lost 0.38%.The credit card issuer and global payments company's shares have seen a decrease of 2.93% over the last month, surpassing the Finance sector's loss of 5.04% and falling behind the S&P 500's loss of 2.2%.The upcoming earnings re ...

Warren Buffett's Investment Philosophy - Warren Buffett's investment strategy focuses on understanding a company's business and execution capabilities, and purchasing at a reasonable valuation [1] Bank of America (BAC) - Bank of America is a significant holding in Berkshire Hathaway's portfolio, making up 11.3% of its investments [4] - The bank has shown resilience and financial strength despite macroeconomic challenges [4] - Revenue and earnings per share are expected to reach $25.1 billion and $0.77, respectively, in Q4 2024, representing a 14.3% year-over-year revenue increase and a 133% earnings jump [2] - Customer deposits grew from $750 billion pre-pandemic to $940 billion by Q3 2024, with 360,000 net new checking accounts added in Q3, marking 23 consecutive quarters of growth [3] - Net interest income (NII) is projected to reach $14.3 billion in Q4 2024, following a trough in Q2 2024 and an inflection point in Q3 2024 [8] - The bank benefits from an uninverted yield curve and increased loan volumes in 2025, allowing it to borrow short-term and lend long-term [5] - Digitization efforts are strong, with 75% to 95% digital adoption across business lines and 2.4 billion client interactions through its AI-powered virtual assistant, Erica, by Q3 2024 [6] - The stock trades at 1.26 times its book value, below its 2022 peak of 1.6, indicating a reasonable valuation [9] - Berkshire Hathaway sold 235 million shares in 2024 but still owns nearly 10% of the bank, suggesting potential upside for investors [10] American Express (AXP) - American Express delivered strong Q3 2024 results with earnings per share of $3.49, despite only a 6% year-over-year rise in billings [11] - The company raised its 2024 earnings guidance from $13.30-$13.80 to $13.75-$14.05 [12] - Credit quality is strong, with a 1.9% write-off rate in Q3 and a robust reserve rate of 2.9% [13] - Spending by millennial and Gen Z customers grew 12% year-over-year in Q3, with higher retention rates and expected double lifetime value compared to older generations [13] - A product refresh strategy has been successful, with 40 products refreshed globally by Q3 2024, including the U.S. Consumer Gold card, which saw 30% higher acquisitions than the Platinum Card [14] - The stock trades at just 3 times sales, making it an attractive buy given its premium customer base, loyal younger clientele, and strong business model [15]

The most recent trading session ended with American Express (AXP) standing at $301.88, reflecting a -0.4% shift from the previouse trading day's closing. This change lagged the S&P 500's daily gain of 0.55%. On the other hand, the Dow registered a loss of 0.06%, and the technology-centric Nasdaq increased by 1.24%.The upcoming earnings release of American Express will be of great interest to investors. The company's earnings report is expected on January 24, 2025. The company is expected to report EPS of $3 ...

Berkshire Hathaway's Stock Portfolio Adjustments - Warren Buffett's Berkshire Hathaway sold $133 billion worth of stocks in the first nine months of 2024, including reducing its stake in Apple and selling nearly a quarter of its Bank of America holdings [1] - Apple, American Express, Bank of America, and Coca-Cola accounted for 70% of Berkshire's $271 billion stock portfolio in Q3 2024 [2] - Buffett is raising cash as the S&P 500 trades at a historically high 30 times earnings [2] Coca-Cola Investment Analysis - Coca-Cola remains a core holding for Berkshire, with 400 million shares worth $25 billion and paying $776 million in annual dividends as of Q3 2024 [6] - Coca-Cola's unit case volume declined slightly last quarter due to weak consumer spending, but management expects long-term revenue growth slightly above the global beverage industry's 4% historical rate [7] - The stock trades at 21 times 2025 earnings estimates with a 3.14% dividend yield, offering steady passive income despite limited growth potential [8] American Express Investment Analysis - Berkshire holds 151 million shares of American Express, a position it has maintained for 30 years [9] - American Express reported $9.9 billion in earnings over the past year, reflecting strong growth from $12.5 million in 1964 and $1.4 billion in 1994 [9] - Net card fees grew 18% YoY to $2.2 billion in Q3, driven by strong customer service and a card membership model [10] - Total transaction volumes grew 6% YoY, with earnings expected to grow 25% in 2024 due to strong card fee growth and low delinquency rates [11] - The stock trades at 20 times 2025 earnings estimates, above its 10-year average P/E of 18, but long-term earnings growth is expected at 14% annually [12]

Stock Performance - The stock of the credit card issuer and global payments company fell by 1.19% in the past month, underperforming the Finance sector's loss of 4.94% and the S&P 500's loss of 0.36% [1] - American Express (AXP) closed the latest trading day at $297.33, indicating a -1.24% change from the previous session's end, lagging the S&P 500's daily loss of 1.07% [2] Earnings and Revenue Projections - The company is scheduled to release its earnings on January 24, 2025, with projected earnings per share (EPS) of $3.02, reflecting a 15.27% increase from the same quarter last year [6] - The latest consensus estimate calls for revenue of $17.19 billion, up 8.82% from the prior-year quarter [6] - For the full year, analysts are expecting earnings of $13.41 per share and revenue of $65.97 billion, marking changes of +19.63% and +9.01%, respectively, from last year [8] Valuation Metrics - American Express has a Forward P/E ratio of 22.45, trading at a premium compared to its industry's average Forward P/E of 12.22 [9] - The company's PEG ratio is currently 1.72, higher than the Financial - Miscellaneous Services industry's average PEG ratio of 1.01 [4] Analyst Estimates and Rankings - The Zacks Consensus EPS estimate has shifted 0.1% upward over the past month, and American Express currently holds a Zacks Rank of 3 (Hold) [7] - The Financial - Miscellaneous Services industry holds a Zacks Industry Rank of 61, positioning it in the top 25% of all 250+ industries [12] Industry Context - The Financial - Miscellaneous Services industry is part of the Finance sector, which has seen a loss of 4.94% in the past month [1][12]

History proves time and time again that long-term investing is one of the best ways to build wealth in the stock market. The key to achieving this is buying and holding shares of quality companies that can perform across economic and market cycles and allowing your investments to grow over time.One important part of long-term investing is diversifying your portfolio across various sectors. The financial industry offers a wide range of companies that provide essential services across the economy and can thri ...