American Express Analyst Finds Positives, Negatives In Q1 Print

Global payments company American Express Company AXP reported mixed first-quarter results Thursday, according to Guggenheim.

The Analyst

Jeff Cantwell maintains a Neutral rating on American Express.

The Thesis

American Express' first quarter shows the company continues to make solid progress in its business, Cantwell said in a Thursday note. (See his track record here.)

For example, customer engagement increased in the quarter and AmEx confirmed several partnership renewals, including with its largest partner Delta Air Lines, Inc. DAL, which accounts for 8 percent of billings and 20 percent of lending, the analyst said.

The company also showed an encouraging change in funding mix, with online deposits increasing 25 percent over the past year — which bodes well for net interest yield, Cantwell said.

A look at the headline numbers reveals mixed performance, he said.

AmEx's earnings per share of $2.01 beat expectations of $1.98 per share, while revenue of $10.346 billion missed a $10.46-billion estimate.

Worldwide billed business of $296 billion missed Guggenheim's $303-billion estimate, while the billed business grew 7 percent year-over-year, a deceleration from 8-percent growth in the prior quarter, Cantwell said.

AmEx maintained its guidance for fiscal 2019 EPS of $7.85 to $8.35 and revenue growth of 8-10 percent. The company said it could even see modest upside due to the Federal Reserve's "pivot" on interest rate hikes, the analyst said.

Guggenheim lowered its revenue forecast for 2019 from $43.7 billion to $43.3 billion due to lower anticipated billed business growth.

The company's progress on strategic initiatives is "high quality," but its financial performance was mixed, Cantwell said. As such, a continued neutral stance on the stock is warranted.