Goldman Sachs analyst Ryan M. Nash maintained American Express Co AXP with a Buy and raised the price target from $263 to $270.
American Express reported mixed fiscal 2024 second-quarter results, with an EPS beat driven by a lower provision while Pre-provision Net Revenue (PPNR) was in line, Nash said. The focus was on its outlook, where American Express is pointing to deceleration in Net Interest Income (NII) and similar billed business growth trends.
The analyst said credit appears to be performing better and offsetting top-line softness.
Putting it all together, Nash noted the quarter’s slower revenue growth and the increasing likelihood revenue could end at the low end of the guidance, which drove shares to underperform, the analyst said.
Looking ahead, while Nash recognized the potential for softness in second-half revenue results, he remained upbeat overall on the story. While revenue growth is likely to come in towards the lower end of expectations, card fees should begin to re-accelerate, and small businesses are showing signs of improvement, as per Nash. The combination of these should be able to offset slowing NII growth.
American Express intends to invest $6 billion in marketing this year, leveraging the benefits of better credit results. As per Nash, this should help position it well for revenue growth into 2025.
The credit is performing better than expected, as losses and its allowance are expected to level off. This should help investors feel more comfortable that it can generate mid-teens EPS growth in the future, the analyst said.
Nash revised his fiscal 2024, 2025, and 2026 core EPS estimates from $13.10, $15.00, and $17.20 to $13.80, $15.00, and $17.45, respectively.
RBC Capital Markets analyst Jon Arfstrom maintained American Express with an Outperform and raised the price target from $265 to $267.
The second quarter was solid, with consistent revenues, controlled expenses, and stable credit quality per Arfstrom. The company did revise its 2024 EPS outlook to reflect the Accertify gain this quarter, though the analyst noted the core fundamental outlook as consistent.
He said the company’s long-term mid-teens EPS growth is achievable and sustainable, even in a slower revenue environment.
Overall, Arfstrom appreciated the high-quality nature of the business model and is optimistic that the longer-term revenue guideposts remain achievable.
Arfstrom expects fiscal 2024 and 2025 EPS of $13.00 (prior $12.95) and $14.80 (prior $15.10), respectively.
AXP Price Action: American Express shares are trading up by 0.32% at $243.31 at the last check Monday.
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