American Express (AXP) Low or Stable Debt Write-Off Might Help Earnings

Market is expecting AXP to show a rise in the quarterly revenue, mainly might be due to the reduction in write-off. American Express is expected to report a 10.2% increase in revenue to $16.588 billion from $15.05 billion a year ago.

The earnings per share is expected to come in at $3.25.

According to S&P Global Market Intelligence data, the executives from the six biggest US credit card issuers noted that consumers are starting to spend more rationally.

These issuers have recorded the fourth consecutive monthly drop in their group average 30-plus-day delinquency rate. I will be looking at American Express, which is low at 0.76%. This is lower than the average 30-plus-day delinquency rate for six issuers which have edged lower month over month to 1.31% in May, according to S&P Global Market Intelligence data.

This would mean write-off rates stay stable in June. This might be able to help AXP on its upcoming earnings as compared to the previous quarter, where delinquency rate was higher, and AXP write-off rate is higher too.

Based on 20 Wall Street analysts offering 12 month price targets for American Express in the last 3 months. The average price target is $241.50 with a high forecast of $285.00 and a low forecast of $175.00. The average price target represents a -3.38% change from the last price of $249.96.

If we were to look at the price target for AXP, this might not be a good area to look at, as AXP previous quarter earnings did report a 11% increase, but the stock price is not moving as it should, this is because the investor sentiment and confidence is still not back yet.

I will share later in the technical section.

If we were to consider AXP for long term, this is a financial stock which has give quite a good return of more than 30% year-to-date, Considering that rate cut is expected to come in September 2024, and consumer spending though is spending rationally, but they are still spending on their debit cards.

With the expectation of rate cut, the disposable income for consumers might also go up, hence, I believe we should be able to see consumer spending picking up, but the credit card delinquency rate should stay healthy.

We are seeing positive signals from MACD and KDJ for AXP before its earnings, with the expectations for a better revenue earnings, we could see AXP continue to make an upside move.

The only thing that could derail this, would be the guidance outlook for rest of 2024, would the consumer spending continue to slow down and there might be other issuers that consumer might shift to.

AXP did a revision to its fees and charges recently, so this might be factor that could affect how traders and investors might perceive the stock price.

If we were to consider how delinquency rate for AXP has drop again since the last quarter, we could be expecting this time to be different, because the debt write-off could stay stable or lower.

Consumer are also slowing down credit spend, this would mean that there is less percentage of debt write-off. Consumer are spending rationally. I will be watching the price action in today (18 July) trading to see how traders and investors would look at AXP before its earnings result tomorrow (19 July)

Appreciate if you could share your thoughts in the comment section whether you think AXP could provide a surprise in its earnings and we could expect a gap up in the stock price?

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.