Earnings Growth & Price Strength Make American Express (AXP) a Stock to Watch

Zacks' Focus List is presented as a curated portfolio of 50 stocks designed for long-term outperformance, primarily driven by a methodology centered on upward earnings estimate revisions. The strategy has demonstrated significant historical alpha, with the Focus List cumulatively returning 2,519.23% against the S&P 500's 854.95% from February 1996 to March 2021, and outperforming in 2020 (13.85% vs. 9.38%). The recent inclusion of American Express (AXP) in December 2021, which has since seen a 54.44% price appreciation and continued upward earnings revisions, serves as a recent example of the list's efficacy in identifying stocks with strong earnings momentum.

Analysis

The Zacks Focus List strategy is centered on identifying 50 stocks poised for long-term outperformance, with a core methodology reliant on positive earnings estimate revisions. This approach has historically generated significant alpha, evidenced by a cumulative return of 2,519.23% versus the S&P 500's 854.95% from February 1996 to March 2021. The case study of American Express (AXP) illustrates the strategy's application; added to the list in December 2021, the stock has since appreciated 54.44%. This performance is underpinned by strong forward-looking fundamentals, including a projected 17% earnings growth for the current fiscal year and seven upward analyst revisions for fiscal 2024 within the last 60 days, pushing the consensus estimate to $13.12. Notably, despite these positive indicators and a consistent 7.7% average earnings surprise, AXP's rank has been adjusted to a #3 (Hold), suggesting that after a significant run-up, the immediate upside may be perceived as more limited from the model's perspective.

Key Decisions for Investors

• Investors holding American Express (AXP) should evaluate their positions, considering the substantial 54.44% price appreciation and the stock's current 'Hold' rating, which suggests a more balanced risk-reward profile after its strong performance.
• The presented methodology highlights the value of monitoring earnings estimate revisions as a leading indicator; consider screening for companies exhibiting a trend of positive revisions and earnings surprises as a potential source of alpha.
• For AXP, the bull case remains contingent on continued earnings momentum; investors should closely watch for further upward revisions and the company's ability to meet or exceed its 17% projected earnings growth for the fiscal year.