AMERICAN EXPRESS COMPANY (AXP)

Model Update — Post Q1 2026 Earnings | May 26, 2026

Update Trigger

This update reflects American Express's Q1 2026 earnings (reported April 23, 2026) and the subsequent guidance reaffirmation. Q1 EPS of $4.28 beat consensus ($4.05) by 6%, revenue of $18.91B grew 11% YoY (vs. our 8.6% FY26E pace), and credit metrics remained exceptionally benign with a 2.0% net charge-off rate (below 2019 levels) and a $24M reserve release. Management reaffirmed but did NOT raise FY2026 EPS guidance ($17.30-$17.90; consensus $17.56), explicitly stating they would reinvest the Q1 beat into marketing and technology. We revise our 2026E and 2027E estimates to reflect (i) higher revenue growth aligned with the 9-10% guided range, (ii) lower provisions on delayed credit normalization, and (iii) higher operating expense reflecting the front-loaded reinvestment. EPS is revised DOWN ~3% on the opex bridge despite higher revenue. MAINTAIN SELL, target price $270.50 unchanged.

FY2026E Estimate Changes

FY2027E Estimate Changes

Key Assumption Changes

• Revenue growth FY26E: 8.6% → 9.2% — Q1 billed business +10% YoY and revenue +11% suggest the guided 9-10% range is achievable; we sit at the middle.
• Provisions / Loans FY26E: 4.0% → 3.6% — Q1 NCO of 2.0% (principal-only) is below 2019 levels and management guided 'generally stable' through FY26. Reserve release ($24M) underscores the benign picture. Normalization delayed but NOT reversed: 2027E moves to 3.8%, 2028E back to 4.0%.
• Marketing / Revenue FY26E: 9.2% → 9.8% — Management explicitly stated they are reinvesting the Q1 beat into marketing. Magnitude estimated at +$500M vs. prior plan.
• Card rewards / Discount rev FY26E: 50.4% → 50.9% — Q1 rewards expense +$513M YoY; cobrand cost growth (+$160M) elevated by JPM Sapphire / COF Venture-X competitive dynamics (Pillar 3).
• Salaries & employee benefits FY26E: +$400M vs. prior — tech hiring (Hypercard integration, Agentic Commerce Experiences) and sales.
• Tax rate: 22.0% unchanged.
• Share count FY26E: 681M avg diluted (vs. 683M prior) — Q1 reported -2% YoY on continued buyback.
• DCF/Residual Income inputs unchanged: Ke (base) 10.62%, terminal ROE 34%, terminal growth 3.0%, probability weights (bear 20% / base 55% / bull 25%).

Valuation Impact

TARGET PRICE UNCHANGED. The valuation is anchored on terminal-ROE / cost-of-equity logic, not near-term EPS. With terminal ROE 34%, Ke (base) 10.62%, and terminal growth 3.0%, the justified P/B is ~4.6x — well below the current ~6.4x. Near-term EPS revisions of ±3% do not change the structural over-valuation case. At $320.51, AXP trades at 18.1x our revised FY26E EPS ($17.70) vs. the 16-17x P/E mean-reversion target identified in initiation. Implied downside to TP: 15.6%.

Summary & Action

Q1 2026 was operationally strong but does not change the valuation math. The print confirmed thesis Pillar 3 (competitive intensification — rewards +$513M YoY, cobrand +$160M) and clarified Pillar 2 (credit normalization delayed, conviction reduced from Moderate to Moderate-Low). Pillar 4 was partially mitigated by Amex's own AI positioning (Agentic Commerce Experiences, Agent Purchase Protection, Hypercard acquisition). Pillar 1 (valuation premium unsustainable) remains the anchor and is on track. The 3.5% drop on earnings day shows the market priced in further upside that management would not validate via raised guidance — exactly the asymmetric setup the SELL thesis identifies.

We MAINTAIN SELL with a 12-month target of $270.50, implying 15.6% downside from $320.51.

This report is the output of an automated equity-research workflow and is provided for educational and demonstrative purposes only. It does not constitute investment advice or a recommendation to buy, sell, or hold any security. Estimates and target prices are model outputs subject to error. AgenticFinanceChile — Equity-Research-Personalizado pipeline.