Shares in the US credit card company American Express are trading higher by half a percent pre-market on Friday. The company’s stock price has traded in a very tight, shallow range over recent weeks. This is despite the company posting a solid earnings beat late last month.
Earnings Beat in Q2
American Express reported a Q2 EPS of $0.30 versus an expected EPS of -$0.08. This marked a 123.08% beat on the consensus forecast though well below the $1.98 EPS posted over the same quarter a year earlier. Earnings were posted on revenues of $7.68 billion. While better than expected, this still marks a notable decline from the same quarter last year.
Volumes Improved Mid-Quarter
The company noted that payment volumes improved in May and June though mentioned that the COVID-19 crisis had weighed considerably on the group’s business. The biggest disruption came from the hit to airline travel over the lockdown period. This was given that except for in very specific instances, international travel was largely prohibited.
Given that second wave concerns are now starting to gain more traction, the outlook for the company looks mixed. Stephen Squeri, chairman and CEO of American Express said:
“There is still much uncertainty about the economic environment as reopening’s are stalled in a number of geographies and status of government support programs remains unclear.”
Risks To The Outlook
Squeri was clear in identifying the hit the company took as a result of the pandemic. He CEO said that the low was marked in mid-April and has improved since. The most significant reduction in the company’s cash flow came from a 40% drop in worldwide businesses billed as most international markets were essentially shutdown to the crisis.
In terms of the main risks looking ahead, Squeri highlighted the reduced volume and demand of consumer travel. Furthermore, further travel restrictions that have already been reintroduced in some places could pose a risk. This would significantly hit American Express once again.
American Express Caught in Triangle Pattern
American Express shares continue to trade within the large contracting triangle pattern which has framed price action this year. For now, price is settled within the middle of the range caught between support at the 89.53 level and resistance at the 97.34 level.
Should we see a topside break, the next level to watch will be the 109.12 resistance. To the downside, any break lower will turn focus to the 76.63 support next.