American Express: Q2 2021 Was Better But Not Good Enough (Preview)

Company Update (AXP US) (Neutral)

Summary

• AXP stock is up 5.4% pre-market following Q2 2021 results, but we remain cautious and believe structural issues are still visible.

• Q2 EPS rebounded after a reserve release; Pre-Provisions Pre-Tax Income is just 7% higher year-on-year and is 24% lower than in 2019.

• Q2 revenue was 5.5% below 2019 level, due to Billed Business at 2% below, dragged down by the historic focus on Travel & Entertainment.

• Card count has recovered after a large Marketing increase, but we believe competition from U.S. bank card issuers is intensifying.

• The higher 2022 EPS guidance represents just a CAGR of 4.1% from 2019, and the current price of $180.19 means a 19.5x P/E. Avoid.

Introduction

We review American Express's Q2 2021 results released this morning (Friday, July 23). Shares are currently up 5.4% pre-market, at $180.19.

We initiated our Neutral rating on American Express in March 2019. Since then AXP stock has gained 57.7% (including dividends, based on the July 22 closing price), roughly in line with …