American Express Earnings vs. Expectations
In the Q1 earnings report for American Express, the company generated $9.06 billion in total revenue. In comparison to the same quarter last year, this represents a 12% decrease, as business slightly shrank amid a slowdown in consumer credit card spending following a spike from the United States (US) individual stimulus checks. The company also fell just short of analyst expectations for revenue as well with the general consensus from Wall Street projecting Q1 revenue to be $9.1 billion.
However, while American Express disappointed in overall revenue, the company blasted away estimates for earnings per share. In fact, the financial services business reported diluted earnings of $2.74 per share. In comparison to the same quarter in the prior fiscal year, where the company only reported earnings of $0.41 per share, this is an increase of well over 100%. American Express also outperformed the projections of Wall Street analysts that had earnings pegged at $1.68 per share.
The increase in earnings despite a decrease in revenues can largely be attributed to the decline in consolidated expenses where American Express witnessed a 7% drop, saving the business around $500 million. Increased spending in entertainment, travel, and other consumer-minded purchases also helped cushion the slightly slowed spending that American Express saw on overall credit card activity.
Future Outlook and Stock Market Reaction
While no formal guidance was provided by the company, the financial services business did make note of how 2021 will likely look moving forward. Largely, business will mostly be focused on transition. With more money allocated toward investing to regain core business and gaining momentum, 2021 will likely function as a play to build up customer engagement. American Express hopes to reach early 2020 earnings guidance in 2022 after the pandemic disrupted those initial plans last year.
Stock market reactions towards the company have been largely negative in pre-market trading despite the better than expected earnings per share mark. American Express is down over 3.5%, with stock prices backing off all-time highs of over $150 per share seen earlier this month. Shares for the company now sit just over $141 per share, with about $5.50 of value per share shaved off this morning alone.
When commenting on the Q1 earnings report, chairman and CEO of the company Stephen J. Squeri said, “I am pleased with our results in the first quarter, where we saw continued improvements in our core business along with best-in-class credit performance, and I’m especially encouraged by the progress we’re making to rebuild our growth momentum going forward.”
About the Author
Tom Price is a writer focusing on Entertainment and Sports Features. He has a degree from NYU in English with a minor in Creative Writing. He has been previously published for Washington Square News, Dignitas, CBR, and Numbers on the Boards.