Why AXP Bulls Are Excited for Next Week's Earnings Call

American Express’ Stock Performance and Strategic Positioning

American Express (AXP) stock has experienced a relatively steady but underwhelming performance this year, mirroring the broader market. Despite macroeconomic challenges, the premium credit card company has shown resilience in consumer spending, particularly in everyday purchases and travel trends, with a noticeable uptick in domestic travel. This positioning suggests that Amex is well-equipped to maintain its stability amidst economic headwinds.

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As American Express prepares for its Q2 earnings release on July 18th before the opening bell, the stock currently trades at fair valuations rather than being undervalued. However, with both top and bottom-line estimates trending higher and management maintaining its full-year guidance, there is a compelling argument that the market may be underestimating Amex’s long-term potential.

I believe the stock deserves a Buy rating ahead of the earnings report. My optimism stems from Amex’s profile as a steady compounder with defensive characteristics. The Q2 results could serve as a catalyst to bridge the gap between rising expectations and current valuations.

The Case for American Express Today

One of the defining traits of American Express is its focus on serving a specific segment of the population—the wealthiest individuals. By carefully selecting customers and offering a premium loyalty ecosystem, Amex differentiates itself from transactional competitors such as SoFi Technologies (SOFI) or Affirm (AFRM).

In the credit card market, Amex stands apart from larger players like Visa (V) and Mastercard (MA) by generating revenue not only from transaction fees but also from interest and net card and service fees. This diversified revenue model contributes to greater financial stability.

Amex’s customer base is highly loyal, with strong retention rates and high purchasing power. This translates into excellent credit quality, with only 23.5% of revenues tied directly to credit risk. As a result, the company faces a lower likelihood of large defaults, leading to more predictable profits and a resilient business model.

During the last Q1 earnings call, analysts were concerned about Amex's ability to maintain its strong credit performance in a tighter monetary environment. However, management maintained its full-year 2025 guidance, expecting revenue growth of 8% to 10% and EPS of $15 to $15.50. These projections imply an annual increase of around 14%, already factoring in a peak unemployment rate of 5.7%.

This steadfast guidance underscores the strength of Amex’s fundamentals and provides reassurance to investors during uncertain times.

Amex Stock Has Been Slow to React

Despite its defensive profile, Amex’s stock has not reacted strongly to macroeconomic challenges. This year, AXP has traded in line with the broader market. However, it dipped to lows around $225 in April during the tariff scare and has since rebounded slowly, matching the pace of the S&P 500 (SPX).

Analysts have revised their projections for Amex’s revenue and EPS growth over the past six months. Revenue CAGR is now estimated at around 7.2%, and EPS CAGR at 9.2%. While these figures are positive, valuation multiples have remained largely unchanged. For example, Amex’s average forward PEG ratio has stayed around 2.4, and the stock still trades at about 2.9x sales—roughly in line with sector averages.

This suggests that while expectations for Amex’s performance have improved, the market remains cautious, leaving room for a potential rerating if the company continues to deliver solid results.

What’s Driving Amex’s Growth in Q2

With Q2 earnings approaching, Amex will need to meet expectations by delivering an EPS of $3.86—an annual increase of 10.5%—and revenues above $17.7 billion, representing 8.3% year-over-year growth. More importantly, billed business trends could be key to boosting investor confidence.

Discount revenue, which accounts for more than half of Amex’s total revenue, is closely tied to growth in the Goods & Services (G&S) and Travel & Entertainment (T&E) segments. U.S. retail sales from April to June have remained resilient, with consumption holding up despite high interest rates. Everyday G&S purchases are steady, and there is potential for growth in this area.

On the travel front, checkpoint numbers indicate a recovery in domestic travel compared to two years ago. While high-ticket international travel may face challenges due to exchange rates and tariffs, domestic and regional travel is expected to offset these headwinds. Management expects a gradual recovery in T&E, driven by leisure travel.

Overall, I anticipate mid-single-digit growth in billed business for the year, which should support discount revenue and reinforce expectations for continued performance.

Is American Express a Good Stock to Buy Now?

Currently, there are more skeptics than optimists regarding AXP. Out of 19 analysts covering the stock in the past three months, eight are bullish, ten are neutral, and only one is bearish. The average stock price target is $305.82, suggesting a potential downside of about 5.7% from the current share price.

However, with management maintaining its annual guidance and the market recognizing Amex’s resilient business model, the odds are in favor of the company beating Q2 expectations. Valuations may not look cheap, but they reflect the market’s understanding of Amex’s long-term potential.

Given the disconnect between current valuations and evolving expectations, I remain bullish, anticipating potential upside after Q2 if the company follows through on its optimistic outlook.