Should Investors Avoid American Express (AXP) Ahead of Earnings?

Shares of American Express (AXP ) climbed on Monday in a sign that investors might be anticipating strong first quarter earnings. So let’s take a quick look to see what investors should expect from American Express when the company reports its Q1 financial results on Wednesday.

American Express has seen its stock price sink roughly 7% over the last 12 weeks. But first quarter earnings season could very well help AXP recover from its recent downturn, especially if the company performs well.  

Earnings season often provides investors the chance to look for stocks that are set to top earnings estimates and sometimes, more importantly, stay away from stocks that look poised to fall short of expectations. American Express follows JPMorgan (JPM ) , Citigroup (C ) , Wells Fargo (WFC ) , and other financial services firms that recently released their Q1 earnings results, which means that many investors have already gotten in a bit of an earnings season groove.

Q1 Outlook

American Express’ Q1 revenues are projected to surge by 15.3% to reach $9.1 billion, based on our current Zacks Consensus Estimates.

Meanwhile, American Express’ quarterly earnings are expected to soar over 29.1% to $1.73 per share. Investors should also note that American Express has earned one downward earnings estimate revision within the last seven days.

However, this still doesn’t give investors any idea if American Express is actually projected to top our current earnings estimate. Luckily, Zacks Premium customers can utilize the Earnings ESP Screener in order to search for stocks that are expected to surprise.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

In contrast, a stock with a Zacks Rank #3 (Hold) or worse, coupled with a negative Earnings ESP, is one that we typically want to avoid during earnings season.

American Express is currently a Zacks Rank #3 (Hold) and sports an Earnings ESP of -4.67%. The credit card company’s Most Accurate Estimate for Q1 is $1.65 per share, which comes in 8 cents below our current consensus estimate. This means that the most recent estimates have come in lower directly ahead of earnings.

With that said, investors should consider American Express a stock that could fall short of Q1 earnings estimates.

AXP is expected to report its first quarter financial results after market close on Wednesday, April 18. 

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