Date: 18 Jan 2019

The credit card giant American Express fell 2.25 percent in after-hours trading after missing analysts expectations on the top and bottom line during the fourth fiscal quarter. American Express reported earnings of $1.74 per share, missing analysts estimates of $1.80 per share, while the companies revenue increased 8 percent from a year earlier, at $10.47 billion, falling short of the $10.56 billion initially forecast by analysts.

Despite the disappointing earnings per share during the fourth quarter, American Express’s annual profit for 2018 was more two times larger than reported during the year earlier, bringing in $6.92 billion during 2018 compared with $2.75 billion reported in 2017.

American Express also issued a fairly bullish forecast for the rest of 2019, announcing that they expected consumer spending to be largely in-line with last year. Banking heavyweights J.P Morgan, Bank of America and Citigroup also confirmed through their fourth-quarter reports that they expect consumer credit quality to be similar to last year.

Consumer spending is considered a bellwether for the American economy, as the U.S relies heavily on the consumer to spur economic growth and gross domestic product. Consumer spending accounts for roughly seventy percent of the entire U.S economy, aside from retail sales, housing and healthcare accounts for two-thirds of total U.S consumer spending.

American Express Chief Executive Office Stephen Squeri said that the company expected to see good returns on recent investments and that they hoped to gain more market share and add scale going forward.

The companies stock price has been under pressure alongside other Dow Jones laggards since it peaked at $114.55 on December 3rd last year. AmEx is expected to open on Wall Street later today around the $97.00 level after closing the day just below the $100.00 benchmark, at $99.41.

 

American Express Daily Candlestick Chart. Source: ActivTrader Platform

American Express Daily Candlestick Chart. Source: ActivTrader Platform

 

Before yesterday’s after-hours drop America Express’s share price still traded below its key 50-day and 200-day moving averages, making it technically bearish despite its recent recovery from $90.00 level.

It remains to be seen if the recent correction higher in U.S equities will last over the medium-term, financial markets are still generally cautious given the ongoing U.S government shutdown and the potential for a further deterioration in the global data and economic growth.

Now that earnings season is in full swing we should see more volatility banking stocks, any overwhelmingly positive news regarding Sino-U.S trade talks or the Federal Reserve talking down 2019 rate increases is also likely to see the American Express share price dragged higher alongside the broader market.

 

Written by Nathan Batchelor, External Analyst

 

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