American Express' 2024 Guidance Spurs Diverse Analyst Opinions - A Closer Look

UBS analyst Eric Wasserstrom maintained American Express Co AXP with a Neutral and raised the price target from $188 to $206.

BMO Capital analyst James Fotheringham maintained American Express with an Underperform and raised the price target from $157 to $159.

Following American Express’ fourth quarter 2023 in-line result and better-than-feared full-year guidance, the analyst boosted his estimates by up to +5%; higher-than-previously-modeled card fees and higher NII are only partially offset by higher expected operating and credit costs. 

Net Interest Income (NII) is the difference between the revenue generated from a bank’s interest-bearing assets and expenses incurred while paying its interest-bearing liabilities.

However, the analyst remains worried about deteriorating credit quality, relatively low reserves, decelerating spending growth, VCE cost inflation, and wider-than-normal valuation gap to lending peers. 

Oppenheimer analyst Dominick Gabriele had an Outperform rating on American Express with a price target of $219, up from $208.

The fiscal 2024 guidance of 9-11% revenue growth is driven in particular by loans and net card fees, the analyst noted, while he expects continued moderation overall in billings. 

The analyst added that Amex also expects EPS growth year-on-year of 13%-17% or $12.65-$13.15. 

The analyst sticks to ~9% revenue growth in 2024 and 2025 but noted massive leverage in lower expense growth and significant capital return that’s not currently modeled should Amex maintain a CET1 of ~10.5%-11% through 2025. 

The analyst also lowered his receivables reserve and net charge-off (NCO) assumptions. Even with an increasing total campy reserve rate through 2025, the analyst noted ~ mid-teens EPS.

Overall, in terms of liability sensitivity, Amex has a buffer to keep NIM higher for longer overall as customers build loan balances despite multiple potential rate cuts, the analyst added. Net interest margin (NIM) reveals the amount of money a bank is earning in interest on loans compared to the amount it pays in interest on deposits. 

The analyst projects first-quarter revenue and EPS of $15.85 billion and $3.34.

Baird analyst David A. George had an Underperform rating on American Express with a price target of $190.

The analyst said that core PPNR was ahead of expectations from softer expenses on less point redemption more than offsetting weaker fees and in-line spread revenue. Pre-provision Net Revenue (PPNR) = Net Interest Income + Non-interest Income – Non-interest Expense.

Credit metrics remain healthy but will continue to normalize gradually, while capital is solid, and Amex increased its dividend by ~17%, George flagged. 

Amex’s revenue guide was in line with consensus, but the EPS outlook is more robust and likely to drive today’s move. He noted that the bar is too high here and would trim positions on today’s strength.

Citi analyst Arren Cyganovich maintained a Neutral rating on American Express.

As per the analyst, the 2024 guidance shows continued momentum within the high-end customer base, driving attractive top-and-bottom-line growth. 

While spending volume growth likely comes below its long-term aspirations for 2024, the analyst noted that other areas, including card fees and net interest income, should provide enough to drive strong top-line growth. 

Credit quality continues to outperform his expectations, particularly given the high level of loan growth in recent years. 

The analyst noted the potential for a US Platinum card refresh this year, which could further drive customer acquisitions, along with higher card fees and value propositions. While he noted that the 2024 guide should be achievable, the recent share move (up 40% over the past three months) lowers the upside potential.

Barclays analyst Mark Devries maintained an Overweight on American Express and raised the price target from $216 to $220.

RBC Capital analyst Jon Arfstrom maintained a Buy rating on American Express with a price target of $226.

Although revenue growth modestly decelerates, the core trends remain strong, Arfstrom noted. He said that expenses remain lower than expected while the credit continues to normalize at a very manageable pace. 

Notably, the updated 2024 outlook supports his view that the company can confidently generate mid-teens EPS growth even in a slower revenue environment, which is positive.

The analyst projects first-quarter revenue and EPS of $15.78 billion and $3.10.

Price Action: AXP shares closed lower by 0.28% at $200.86 on Monday.

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