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On Tuesday, Jefferies updated their assessment of American Express (NYSE:AXP), raising the price target to $235 from $225, while keeping a Hold rating on the stock. The firm's EPS estimate of $3.26 is just below the consensus of $3.28. American Express is expected to report total revenues net of interest expense at $16.5 billion, marking a 9.8% year-over-year increase. Non-interest revenues are anticipated to rise by 6% year-over-year to $12.7 billion.
The report noted that despite the year-over-year growth, there has been a deceleration in growth and spending activity as indicated by recent industry conferences. Management has confirmed that the second quarter of 2024 is on track to perform similarly to the first quarter. However, American Express has been outperforming the industry with credit card receivable volumes growing 11.3% year-over-year as of May.
Jefferies expects American Express to set aside $1.4 billion for provisions in the second quarter, which includes a reserve increase of $147 million, or 3 basis points of the total $5.6 billion reserve, primarily due to loan growth. The firm forecasts that total issuer net charge-offs (NCOs) will reach 2.5%, a rise of 30 basis points from the previous quarter. Specifically for card receivables, NCOs are projected to be 2.4%, up by 10 basis points quarter-over-quarter.
In other recent news, American Express has made significant strides in the hospitality sector with the acquisition of Tock, a restaurant booking platform, and Rooam, a contactless payments platform. The financial details of the Rooam acquisition remain undisclosed, while Tock was purchased for $400 million. These acquisitions are part of American Express's strategy to enhance its dining network and provide more targeted services to its premium customers.
American Express has also reported an increase in delinquency rates for its U.S. Consumer and Small Business Card Member loans. The total loans for the consumer segment stood at $84.0 billion, while small businesses reached $28.2 billion.
Several financial firms have provided their analysis of these developments.
Barclays maintained an Equal-weight rating on American Express, predicting potential 10% revenue growth by 2024, driven by Net Interest Income contributions. Wells Fargo also maintained an Overweight rating, viewing the current stock valuation as an investment opportunity. Meanwhile, Citi initiated coverage with a Neutral rating, setting a price target of $250.00 per share, based on lower revenue projections offset by reduced expenses.
These are the recent developments concerning American Express that investors may want to keep an eye on.
InvestingPro Insights
As American Express (NYSE:AXP) navigates the financial landscape, current metrics suggest a strong position in the market. With a market capitalization of $168.68 billion, the company is a substantial player in the consumer finance industry. Investors may find the P/E ratio of 18.64, based on the last twelve months as of Q1 2024, relatively attractive given the company's near-term earnings growth. Additionally, the PEG ratio of 0.69 indicates potential for growth when considering earnings projections.
Revenue growth remains robust, with a 9.33% increase over the last twelve months as of Q1 2024, and American Express's commitment to shareholder returns is evident with a dividend yield of 1.19% and a notable 16.67% dividend growth rate in the same period. The company's stock has also experienced a significant 26.33% price total return over the last six months, signaling positive investor sentiment.
For investors seeking deeper analysis and more such metrics, there are additional InvestingPro Tips available, including insights into the company's profitability and liquidity status. With the use of coupon code PRONEWS24, readers can access these valuable tips and enjoy up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. American Express's next earnings date is set for July 19, 2024, which will provide further clarity on the company's financial trajectory.
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