Shares in US payment systems company, American Express, are trading a little higher pre-market on Monday. This early demand exists despite the group posting a weaker-than-expected set of third-quarter earnings on Friday.
Earnings & Revenues Lower YoY
American Express reported third-quarter earnings per share of $1.30. This slightly undershot the $1.34 EPS Wall Street was looking for. At this level, earnings per share are 17% lower year-on-year. The revenues were slightly higher than expected at $8.8 billion, versus the $8.6 billion forecasted. However, the result still reflects a 20% drop in year-on-year revenues.
The credit card company reported that its cash reserves, which include credit loss provisions, rose to $665 million over the quarter taking the total over Q3 to roughly $7.2 billion.
Firm Recovery Since April
Commenting on the group’s results, the firm’s CEO Stephen Squeri said:
“While our business continues to be significantly affected by the impacts of the pandemic, our third-quarter results have increased our confidence that our strategy for managing through the current environment is the right one”.
Squeri was keen to praise the pickup in the firm’s business since the height of the COVID pandemic, saying:
“Since the lows of mid-April, we have seen a steady recovery in our overall spending volumes. In fact, we had positive year-over-year growth in non-T&E spending, which has long accounted for the large majority of our overall volumes.”
Risks In The Outlook
However, Squeri was also unequivocal in highlighting the risks that remain going forward, especially relating to the pandemic.
Looking ahead, the firm’s CEO cautioned that:
“While credit remains strong, with delinquencies and net write-offs at the lowest levels we have seen in a few years, we remain cautious about the direction of the pandemic and its impacts on the economy, which is reflected in our reserve levels.”
American Express had seen its stock price rallying firmly on the back of better than expected Q2 results back in July. However, this rally was capped at the 109.12 level. It fell sharply amidst the uptick in COVID second wave fears. This is alongside the news that Trump was canceling talks on delivering a second stimulus package until after the elections.
AmEx Fighting To Stay Above Bull Trend Line
Following the breakout above the bearish trend line from year to date highs, AmEx shared have been underpinned by rising trend line support from year to date lows.
However, price has yet to break above the 109.12 resistance. With momentum studies showing loss of upside pressure, there are risks of a move back down to the 97.34 support. If this breaks, it would open the 89.53 next.