How will the global coronavirus (COVID-19) pandemic affect American Express' (NYSE:AXP) coming first-quarter results? The company talked about its reduced guidance and new expectations in a phone call Tuesday morning that was originally planned to be an investor day.
Still going strong ...
The company's recent fourth quarter showed continued strength as the 10th consecutive quarter of adjusted revenue growth at or above 8%. There were more than 11 million new customers over the full year, with 70% choosing fee-based products, a strong driver of revenue for American Express.
It has a differentiated business model with several products and services as well as strong digital capabilities to drive sales and growth. The average cardholder spends three times the amount of other cardholders, and they are loyal -- attrition rates didn't change during the Sept. 11, 2001, terrorist attacks or the financial crisis.
... But guidance is reduced
Based on trends that have already been perceived in markets further along in dealing with COVID, such as China, and seeing the position in Europe and the U.S., its strongest market, the company gave an outlook for the first quarter of 2020.
CEO Stephen Squeri gave a worst-case scenario of 2% revenue growth and a moderately worse-case scenario of 4% growth for the first quarter. Adjusted earnings-per-share (EPS) guidance for the first quarter was between $1.90 and $2.10 (for comparison, EPS came in at $2.01 for the first quarter of 2019). Previous guidance for the full 2020 was $8.85 to $9.25 per share.
Squeri also noted that throughout this time people will be spending on consumer staples, such as groceries and pharmaceuticals, as well as through e-commerce, which will continue to drive revenue.
Squeri gave three thoughts to close out his remarks:
- The company has strategically planned for risk and has a healthy, differentiated business.
- The company's platform allows for continued growth even during this time.
- While management is dealing with current challenges, its focus is long-term.