Welcome back, everyone. We have an exciting week ahead
of it. It's earnings season.
It's officially started. We have the busy week where all
these great companies give us a report card of how things are
going. That's all earnings season is.
We get to see how things are going compared to what we
expect. If companies beat their earnings
and they're doing better than expected, that's a good thing.
Typically, the stock will do better.
If they have disappointing earnings, especially with prices
being where they're at, well that could mean trouble for
these companies. So this earnings season is
important. What's going on with these
companies and their fundamental developments are very important.
We have a couple big companies reporting this week.
We have Netflix and Tesla both charging for this week.
They're two of the first big important companies to report
earnings, but they're not the only ones.
We also have a whole list of here of the most anticipated
earnings this week. We have Procter and Gamble
reporting earnings Tuesday before market open.
We have Netflix reporting earnings Tuesday market after
close and I have personally a large amount invested in Netflix
so I'm looking at that one. I have a lot to say about it.
We have AT&T. This is a company that I
followed for years. I at one point my investing
history owned AT and TI even managed to eke out a profit in
it. But AT&T has been struggling.
I have some thoughts on this company will be looking at their
upcoming earnings and then after AT&T market close on Wednesday,
we have probably the most anticipated earnings of the week
which is Tesla. The debate goes on, is Tesla a
car company? Is Tesla a tech company?
I've been on the side where I think it's a car company.
I think it leans towards that way.
But I want to look at the data, I want to look at the numbers.
I want to look at what the expectations are for Tesla this
week, then moving on to Thursday before market open.
We have Union Pacific. I'm invested in this company and
I have a very specific story for this stock.
What I think it needs to have happen for Union Pacific to give
really good returns. We're going to be looking
Thursday after market close at Intel.
We know this is a big one passed around the value investing
sphere. So I'll be giving some thoughts
on this one as well as their earnings predictions.
And then we have Visa. This is one that I really like.
I think Visa is a top tier compounding machine.
It's a great company. I own the counterpart
MasterCard, but Visa is one that I also think is is amazing.
So I'll be giving my predictions on Visas and I'll throw in
MasterCard earnings as well going into Thursday.
Then finally on Friday before market open, we have American
Express. We'll be looking at that one as
well. Eight companies in total is what
I'll be reviewing. This is a very busy week and
we're going to see a lot of fireworks as earnings season
plays out. Expectations are very high.
The market has been racing up. These companies need to perform
to keep their valuations where they're at.
So with that said, let's go ahead and jump in now let's go
ahead and start off. We're going to kick things off
Tuesday market opening with Procter and Gamble, the consumer
staple king. They make products like this.
This is a picture of just some of them.
This isn't even all of the products they make.
It's a lot of these cleaning products, chemicals, you know,
when you want to clean your kitchen floors, that type of
thing. And it's extremely diversified.
So this is a company where they sell a lot of little things and
this type of company is exactly the type of company that that
Terry Smith likes. So you'll see it in Terry
Smith's portfolio. He considers these very
defensive, diversified brand franchise companies as really
good investments. Now I've gone ahead and I've
made slides for each company that show you the projected
earnings and the revenue for this upcoming quarter.
For example, with Procter and Gamble here, we have earnings
per share expectations for Q4 of last year of $1.70, which would
be an increase of 6.88%, so a nice increase in earnings per
share. And then they're expecting
revenue of 21.5 billion, which is only a 3.48% increase.
So this shows what I think is a a pretty mature company.
You're getting 3 to 4% revenue growth, 6 to 7% earnings per
share growth. They'll pay out a little bit of
a dividend, so you might get like an 8 to 9% return if they
hit their earnings per share estimate.
When I look at Procter and Gamble, I actually think this is
a great company. It's a defensive one.
It's steady. It's at a a reasonable
valuation. It trades at a 4% free cash flow
yield. So there's not a ton baked into
the price here. the PE ratios out of 23, which I think might
actually be a little bit low for a company this diversified that
has this predictable of earnings.
When we look at the financials of it, it also looks really
good. The tool that we're using here
is Qualtrum. This is included as part of the
Patreon. We look at the revenue and this
is the issue I have with this type of company.
Terry Smith really loves these type of companies and I agree
with him that these are really defensive companies.
Consumer staples are very good bets for long term compounding
machines. The issue is they're not growing
quite fast enough. So I like looking at consumer
staples that are growing a bit faster.
I consider Microsoft a consumer staple.
I consider Intuit a consumer staple.
I consider Costco a consumer staple.
All of those companies are growing much faster than Procter
and Gamble, and they're all very defensive as well.
The free cash flow is also pretty stagnant over the past
decade. You can see that in 2009 it was
13 billion, now it's 13.7 billion.
So you're getting virtually no growth in free cash flow.
If we look at the free cash flow per share, you're getting a
slight amount of growth here, but it's not strong.
It's around 3 to 5%. I don't find this as an
attractive situation to invest in.
The company is simply growing too slowly.
So I'm not going to be investing in Procter and Gamble, but I do
believe that this company will be earnings.
I think that's going to happen this quarter.
I'd be very surprised if they don't beat their earnings per
share estimate and their revenue.
Now I could be wrong, so don't bet on this.
But from what I can see, the consumer is very strong.
They're spending on lots of small products like this.
Unless Procter and Gamble is losing a lot of market share
from competitors, I believe the overall market is growing.
I believe the company has pricing power and consumers are
very strong right now. So I'd be very surprised if they
came in under their earnings per share estimate.
Now moving on from Procter and Gamble Tuesday after market
close, we have Netflix. This is a company that I do have
a large investment in. If we go over to this story
fund, this is my secondary portfolio.
It has just a handful of high growth tech companies, one of
them being Netflix, and I currently have a total value of
$50,700 in this company with 4800 of that being gains.
Now there's a lot going on with Netflix, so let's go ahead and
just take a look at some of the things going on with it.
First of all, we can look at the earnings per share estimate
here. The average analyst expects
Netflix to earn $2.20, which is an increase of 1760% from a year
ago. Now I'd love to just look at
that and say that Netflix is growing their earnings per share
by 1700%, but obviously something is a little bit off or
a little bit uneven with that number.
So when I see these outlandishly huge earnings per share growth,
I like to go back another year and look at it compared to just
two years ago. When you do that, it looks quite
different. It's only up 65% from 2022.
So let's go ahead and take a look at what this looks like
visualized on the earnings per share chart.
Now I've brought up Netflix here because it's Netflix and I think
it's appropriate. Let's go ahead and move into
dark mode. It just makes sense.
Netflix is a night time company. Let's go ahead and move into
dark mode and look at the earnings per share and we can
see the issue right here. If we switch into quarterly, we
can see the earnings per share the previous quarter of the
previous year was $0.12 and as you can see it was unusually
low. So Netflix had some extra
expense or tax expense or something go on to 'cause this
earnings per share to be much lower than their normal EPS and
because of that it's artificially boosting the year
over year gain. This is the reason why you want
to open up the historical charts.
You want to get context to what these earnings per share year
over year gains are Now again, when we go back two years, when
we go back 1234, it was $1.33. So it's no longer going down,
it's going up. And I would say that this is
still a pretty good earnings per share gain over a two year
period. They're gaining 65% EPS over 2
years and Netflix is expected to gain around that cadence for the
next couple of years around 30 to 35% earnings per share gains
per year. The revenue which I also think
is very important. In fact I would argue that for
Netflix the revenue gain is probably more important than the
earnings per share gain because the story of Netflix has been a
slowdown A halting the competitors raced into to
streaming. They slowed down Netflix's games
and they're re accelerating their revenue back to double
digits which is an incredibly important part of this story.
That would bring the revenue to 8.71 billion which is a 10.96%
increase over the previous year. So that is a big increase 10.96%
for Netflix which was supposed to be a no growth company and
this is what investors are getting behind.
This is the reason that Netflix's valuation traded back
up to such a high PE ratio. Remember when it dropped down to
around a 15 PE? It was around a 14 to 15 four
PE. That was when it was all doom
and gloom. Netflix lost subscribers, the
revenue slowed down, everybody became very bearish and the
stock got re rated, which means that the valuation got chopped
in half. Now the valuation has doubled
again because investors are seeing that they re accelerated
growth, they're gaining subscribers and it doesn't look
like things were so bad as investors were treating it.
So we have an expanding of a multiple back into the premium
territory of the 34 PE and this brings up other challenges for
Netflix for example, we have this from the Wall Street
Journal here. Let's go ahead and take a look
at this article. Netflix has its own tough act to
follow. In this article, the Wall Street
Journal highlights the conundrum of having this high rating going
into earnings. To be Netflix these days is to
occupy the strange dichotomy of being a company that has won the
war but still has plenty of battles to fight.
Now, this is something that I've argued for for years.
I've even come out with videos saying Netflix has won.
I'm referring to the streaming wars.
They won the streaming wars years ago, but to the victor
might have gone too many spoils. Netflix shares have jumped 40%
since the company's strong third quarter results three months
ago, which also includes the announcement of price bumps on
certain Netflix streaming plans. That has some on Wall Street
worried that even good results won't prove good enough this
time. That is the key line for Netflix
going into earnings season. Investors are concerned that the
bar is so high for Netflix. They're expecting so much.
Everything is so high of an expectation that if Netflix has
any disappointment in the earnings results, stock is going
to drop. The stock will drop 10 to 15%.
So this is the conundrum with Netflix right now.
Citigroup analyst Jason Bazinet downgraded the stock to a
neutral rating on January 9th. Across 2024 and 2025.
The Street has lofty expectations for Netflix, he
wrote. Now we can take a look at these
lofty expectations. Analysts estimate that Netflix
added 8.8 million paying subscribers in the fourth
quarter, and this comes after another quarter before it where
they gained 9 million subscribers.
So Netflix said in their last quarterly report, we gained
around 9 million and we expect around the same amount next
quarter, and that's what the analysts are tying in.
But they also said that it could be off by a few million.
So Netflix could come in with 7 million or 10 million.
We don't know. They're expecting 8.8 million.
If Netflix comes in with six million, 7,000,008 million, will
that be enough? Maybe not.
The stock will probably sell off.
If that's the case. That would equate to more than
17.5 million additions in a six month period, which Netflix
hasn't done since the first half of 2020 with the onset of the
pandemic. So Netflix is growing so fast
and as such high growth expectations that the last
comparable time was during the COVID pandemic in 2020.
That was a time period of unusual growth and we're
expecting the same unusual growth now.
Longer term, both account sharing and advertising are
expected to revive Netflix revenue.
Even if subscriber growth stalls, analysts expect Netflix
revenue to grow 14% this year and 11% next year compared with
6% growth estimated for 2023. So Netflix is now expected to
over double their revenue growth year over year.
These are very lofty expectations for the company.
So overall, the issue with Netflix is that the valuation in
the multiple has risen up to meet these lofty expectations.
Investors are excited about the future, about the momentum,
about all the great things that are happening with Netflix
stock, and they're now paying up to buy the company to match that
excitement. But that does create this
scenario where you have a bit more downside.
When Netflix was trading at a 15 PE, it was being priced like
your average company, just any company in the S&P 500, even
cheaper. Netflix was really just thrown
out. Investors completely underpriced
it, and now there's a chance they could be overpricing it a
little. When I look at this overall, am
I going to sell out of Netflix for fear of it trading down
after earnings? No, I'm not, because I look at
things very long term. Right now we have to separate
short shelf life stuff from long shelf life stuff.
Short shelf life are the current multiples of the company being a
little bit stretched and expectations this quarter being
a little high. That is short shelf life stuff.
Next quarter will be moving on. They'll either miss a little bit
or hit, it doesn't really matter.
What matters is that long term, the next 5 to 10 years, Netflix
has way more subscribers than they do today.
They continue their global dominance.
They March towards 500 million subscribers, they generate 10
plus billion dollars of free cash flow per year and they do
massive amounts of buybacks. All of that type of stuff
developing over a longer time period will cause this stock to
gain in value. So when I look at this, Netflix
in the short term is very risky, lofty valuation, high
expectations that's been known to cause sell offs if they have
any disappointment which is a real possibility.
Long term, I'm still incredibly bullish on the company as I
think that the long term expectations are still not fully
priced in. So I look at this company and I
see a lot of positive things moving forward.
Revenue momentum, I see free cash flow going to all time
highs. The next quarter free cash flow
is going to be absurdly high compared to this and I think
they're even going to have good free cash flow in 2024.
When I look at the margins of the company, they're also
expanding over time. Even as Netflix has increased
their budget over the past decade, their operating margins
continue to climb. So currently, even though
there's a high degree of uncertainty in the short term,
Netflix I believe still has a very predictable long term
trajectory. I'm going to hold it and chill.
Now we move on to Wednesday before market open and we have
AT&T. Let's go ahead and take a look
at this one. The expectations for AT&T this
quarter are earnings per share of $0.56, which is a decline of
8 1/2% and revenue of $31.42 billion.
That's so much money. This company has so much
revenue. Unfortunately that's an increase
of only .26%. So they're predicting a decline
in earnings per share year over year and completely flat
revenue. That's actually revenue decline
if you're factoring in real revenue due to inflation because
inflation has happened year over year.
So they're actually earning a little bit less revenue if you
want to factor that in. But regardless, if we look at AT
and TI have a couple thoughts about this company.
The reason I want to point this one out is because I feel like a
lot of investors are either trapped into this company
because of the value of it or they're trapped into it because
of the dividend of it. That is two things that attracts
people to this company, which I believe is not a great company
to invest in. Let's go ahead and take a look
at the valuation and at the dividend.
Let's first start with the valuation.
AT&T has a ridiculously low valuation of a Ford PE of 6.7.
That is such a low valuation that the commodity multiple,
which is the multiple company trades at, if it's neither
growing nor destroying value, is somewhere around 12.
That's around the commodity multiple.
That means a company really has no expectations.
It's just at a steady state multiple 6.7 means that the
company's priced to destroy wealth.
It's priced as if it's in decline.
It's priced as if it's a huge opportunity cost.
So this thing is priced so low, the investors are expecting it
to be a bad bet. That's how low the multiple is.
When we look at the dividend of the company, the dividend yield
is currently 6.66% almost, you know, 7% dividend, very high
yield that you're getting for the company.
So a novice investor might come in to the stock market and they
say I want to follow Buffett, which he invests in companies
when no one else wants to, right.
We want to invest when everyone else is fearful.
Nobody wants to buy AT&T. That's why the multiples at 6.7.
And we want to invest in companies that pay a very high
yield. You're getting a high dividend
on them, right, especially for a dividend investor.
So you want to get that juicy 6.7% dividend yield.
And both of these are the wrong takeaways for the company.
Investors like Warren Buffett made the majority of their gains
investing in companies that had incredibly high qualities,
incredibly good qualities. They had high returns on
tangible assets, high returns on capital employed.
They have very good brand value. They have pricing power and they
have a deeply entrenched Moat. AT&T has none of these intrinsic
value drivers. So when we look at the company,
the revenue is not growing at all.
They've sold off some stuff like Warnermedia, which has caused
the revenue to go down. But even outside of that, the
revenue isn't growing. We look at the cash flow of the
company. It generates a lot of cash flow,
but it hasn't grown in over 15 years.
So you have flat free cash flows, you have flat revenue.
You have no growth of this company.
You have earnings that are also completely stagnant for decades.
So this is, it's like buying a bond, but there's also risk with
it because of the amount of debt they have.
This company has an enormous amount of debt and the interest
payments on this debt eat into their profitability.
The higher the interest rates go, the worse it is for AT&T.
They can't afford to do that much in way of share buybacks.
So they can't increase value that way.
So they have to rely on paying the dividend.
But because their financials have been so poor recently, they
cut the dividend by about 40%, about 50%.
You can see it cut in half right there.
This isn't a good company. It's not a good investment.
If you're investing in this company, you're hoping for a
value trap to suddenly become a good company.
And history shows that that rarely happens.
It can happen, but it just happens very rarely.
It's not a bet that I think it's worth taking.
So when I look at AT&T, we can look at this earnings estimates
and this revenue as a guide of what to expect for the future.
More flat quarters, more up and down earnings per share.
Overall, a stagnant, large, mostly saturated company that
has very little growth ahead. If they could turn the story
around and somehow come out with a new product or technology that
spurs growth forward, that would change the story.
But doing so is betting against all the historical past of the
company, which in my experience is a bad bet to do.
Investors like Warren Buffett find companies that are already
on a good path, They're already doing really well, and they
invest in those companies and join the ride as they continue
to compound. Lots of other investors dive
into value traps. They get caught up into
companies like AT&T and they burn a lot of capital and
opportunity cost when they could be investing in better bets.
So for me personally, I think there's better opportunities
than AT&T now moving on after market close on Wednesday, we
have Tesla, the most anticipated earnings report of the week.
Tesla's always a highly debated stock.
There's many opinions on this one.
I still am on the debate of whether or not Tesla.
It is an automaker, a car company or a tech company, and I
know many people feel that that's crazy to even debate
that. Look at all Tesla does with
batteries and insurance and their full self driving and all
of that. But the numbers don't lie.
For me that continues to be the same debate and I want to show
examples of this. Now let's go ahead and take a
look at the earnings estimates for Tesla.
We have the EPS estimate of .74 cents per share, which is a
decline of 38%, the revenue of 25.76 billion, which is an
increase of almost 6%. So we have a decline in earnings
per share and small increase in revenue and I say small for
Tesla. For most companies that's a
decent increase. For Tesla, that's a little shy
6%. Let's go ahead and take a look
at what what things were like last quarter after they
reported. If we rewind back to October
18th of 2023, The Wall Street Journal has an article
highlighting what was going on at this time period, so we're
going to just do a little blast from the past here.
Chief executive Elon Musk warned Wednesday that Tesla would face
enormous challenges scaling up factory production for its long
delayed cyber truck, signalling profits could remain under
pressure in the coming quarter. So that must be where the
decline in EPS came from. The electric car maker reported
a 44% decline in the third quarter of net income, a steeper
drop than Wall Street expected, as price cuts from the company's
lineup continue to take a toll on the bottom line.
So Tesla's done a lot of price cuts over the past year, and
that's dropped their earnings per share, even though they're
gaining more in revenue. On Tesla's earnings call, Must
struck A cautious tone about the year ahead, expressing concerns
about the broader economy, including higher interest rates
and their impact on consumers. Now, I've said before that I
don't invest in car companies. I don't like the industry, the
boom and bust nature, the low returns on capital and the low
operating margins. I don't like the fact that it's
a very competitive industry with lots of well capitalized
competitors. I also don't like the fact that
the product requires consumer financing, which becomes more
expensive during times of higher interest rates.
So I've said before many times that I don't invest in car
companies and that has caused a lot of Tesla investors to point
out to me that Tesla's not a car company because they have the
full self driving tech. They have cameras in it, They
have software subscriptions, they have insurance, right.
They have the battery network, they have all of this type of
stuff. They have the advanced
manufacturing. All of this makes them not a car
company. But to me, I'm still not
convinced. I'm still not fully believing
that Tesla's far more than a car company.
Let's go ahead and take a look at an example here.
Apple isn't just a phone company, they're a tech company,
and we can look at the financials to determine what a
tech company looks like. The most important chart I
believe illustrating this point is the operating margins of the
business. The operating margins of a tech
company, even a hardware tech company should be at 25 to 30%
or at least above that. Most tech companies have much
higher operating margins, but even ones like Apple that sell
enormous amounts of hard goods devices still have 25 to 30%
operating margins. And we can see the Apple has
kept these operating margins around 30% for the past couple
of years. So that is the operating margin
of a hardware tech company. Now if we compare this to Tesla,
we can see what their operating margins look like.
We open it up and there was a time period where this looked
pretty convincing. Tesla sales were exploding,
their car prices were going up and the operating margins were
going up in lockstep quarter after quarter, higher and higher
operating margins. And this looked like it was
becoming a tech company elevated from the realm of a car company.
Right here in this category is where you have tech company like
operating margins and Tesla was achieving that in 2021 and very
early 2022 due to their huge price increases, selling lots of
cars, their operating leverage, everything was coming together.
But then look what quickly happened, Interest rates went up
and subsequently Tesla has lowered prices on all of their
vehicles, Their operating margins have been slashed in
half. If we look at this over the past
five years, we can see this even clearer. 2021-2022 operating
margins of a 19%. Then last quarter the operating
margins were 7.55%. Tesla's margins are going down
closer to the average of a car company.
So the reason that I'm not currently invested in Tesla is
because it not only has a high valuation, there's a lot of
expectations in it. But for me personally, I'm just
not confident in its ability to break out from the metrics, from
the operating metrics of the car industry.
It might do it in the future and I'll be happily proved wrong.
I want Tesla to be successful. I have no problems with this
company doing well, but for me it's not one that I'm confident
in, so I'm staying out of it. Now we move on to the rail
company Union Pacific, which is reporting earnings Thursday
before market open. I have a smaller holding in
Union Pacific, but it's one of my positions in my main
portfolio. So I am bullish on this company.
The analyst estimates are little, Well, they're negative
this quarter. They're expecting earnings to go
down and revenue to go down. The earnings per share should
drop around 3.78% and the revenue should drop around 2%.
Now there's a specific story with Union Pacific and it's
unlike any other company I own. This company's not growing its
top line growth. It's the only company in My
Portfolio that does not have top line growth.
When I look at this longer term, it still does not have much top
line growth. We go back to 2012 and it has
around the same amount of revenue as they do today, so
very little growth overall. I don't consider this a growth
company. Union Pacific story is all about
margins, about efficiency, about becoming a more efficient
railroad like Canadian Pacific. If Union Pacific's operating
metrics become closer and closer in efficiency to Canadian
Pacific, the stock will increase in price.
It will move upwards because the big thing holding this one down
right now is its operating metrics.
They are the worst ran railway of any of them, any of the class
one. Now there's a new CEO, Jim
Vayner that joined and he's trying to turn things around.
He's trying to increase the operating metrics.
So we'll see how he does. I am giving this company one
year to make progress on this goal.
If they don't increase their operating metrics, notably by
the end of 2024, I'm moving out of this company because if they
don't have the increasing operating metrics, I don't
believe they're going to have substantial revenue growth.
So the entire story is reliant on the operating metrics
increasing, but I'm not going to give them forever with this
company. By the end of 2024, all
determine the progress and I'll make a decision whether or not
to hold this company. Now we move on to Intel, which
is reporting earnings Thursday after market close.
Let's go ahead and take a look at the earnings estimates by the
analysts. The average analyst estimate for
Intel's EPS is $0.46, which is a 168% gain over the previous
year's quarter. Now of course, that seemed a
little on the high side. For a company like Intel, that
seems like an anomaly. So I tried to average it out, or
at least normalize it a bit by going back even a year further
and seeing how the earnings per share compares to two years ago
compared to two years ago. It's not an increase of 168%,
it's a decrease of 59%. So that's from 2022 on the same
quarter. To look at this visualize, we
can bring up the earnings per share chart here and we can zoom
in over the past 10 years to make this clear.
We have the earnings per share right here, the negative quarter
that they're comparing to. If we go back 1234, we can see
that it was $1.13. So we're going from a dollar
13-2 years ago to $0.46 this year.
Now on a longer timetable, we know that Intel ran into a lot
of trouble and they're trying to get back on track.
So this is a recovery play. We want to see Intel steadily
grow earnings, which is exactly what they're doing. $0.46 is an
increase over the past year. The story of the recovery is on
track. I believe Intel's going to be
earnings. I think they will.
We've seen AMD, we've seen NVIDIA.
These companies are going nuts right now and Intel should gain
from the secular trends in this industry.
If they don't, if they don't beat earnings, if they don't do
well this quarter, then that's a very tough situation to be in
when their pairs are doing so incredibly well.
So my prediction is that Intel beats earnings, but we'll see.
Now after Intel, we have Visa reporting earnings Thursday
after market close as well. Visa, I believe, is one of the
best companies in the world. I own the counterpart
MasterCard. There's a few differences.
MasterCard has a bit more value add services.
MasterCard has a bit more growth internationally.
But Visa has a huge market share in the US and both of them
equate to a very powerful duopoly.
Now the earnings estimates from the analysts are that Visa is
going to earn $2.31 in EPS, which is a 7.3% increase year
over year. The revenue is going to be 8.55
billion, which is a 7.69% increase year over year.
These are both very strong numbers.
It shows that the company grows and grows and grows.
On the full year. Visa should grow 12 to 14%.
I think it's going to be a very good growth year for Visa in
2023. So this is wrapping up a
compounder once again, growing every single year.
This is what I believe constitutes a great company at
not too demanding of evaluation and I believe Visa will beat
their earnings. I think they're going to beat it
by a sizable amount based on consumer spending.
And what I see when I visit Costco's, when when I go out,
there's people spending a lot of money.
Consumers are really excited about spending money.
The economy's been good. Inflation might come down a
little bit, which hurts Visa. But overall, I think the strong
spending trends, the strong consumer, I think is going to
lift the stock further. So I have very high expectations
for Visa. And then finally, Friday before
market open, we have another credit card company, but it's a
bit more, which is American Express.
When we look at American Express, there are some notable
differences between this company and Visa and MasterCard.
And there's a reason I have a small preference for Visa,
MasterCard over American Express.
American Express tries to do a lot more than their digital
network. They've tried creating an entire
ecosystem of finances and wrapping in the top spending
Americans into that ecosystem. Normally I like ecosystems.
I like them in Apple, I like them in Microsoft or different
companies, but in the digital payment network, I believe the
real value is how vast and how large their payment network is,
which Visa, MasterCard have the largest market share.
So I have a preference over the large market share than I do
over the ecosystem. Now looking at the analyst
estimates for this quarter, American Express is supposed to
report $2.65, which is a 27% increase over the previous year.
That's a huge increase. I bet there's a little bit of
lumpiness in the earnings per share.
The revenue is going to be a 12.51% increase.
So we're expecting a big recovery, a big increase in
American Express. Let's go ahead and take a look
at some of these numbers. Let's bring up American Express
and look at the earnings per share chart to give it context.
Looking at a singular quarter sometimes can be a bit
misleading if you don't have proper context.
And when we look at this, we can see the issue right here.
If we go back 1234, it was $2.07.
So next quarter they're expecting $2.65, which is at 30%
increase. That's really strong.
But if we look at this, we notice this was an unusually low
quarter. It was the lowest of the
previous two years. So it's a good increase.
But when we normalize it and we go back a little bit further
1234, it was actually higher two years ago than one year ago.
So their earnings per share is growing and I think it's growing
steadily, but not quite as fast as this quarter would imply.
So the earnings per share is growing and the revenue is
growing quite nicely as well. We're expecting I believe $15.95
billion in revenue. We zoom in over the past 10
years, we go up to 15.34 in the previous quarter.
So we're expecting 12% revenue growth which is really strong.
American Express is a great company that's expected to have
very strong growth and like Visa with all the spending that
consumers are doing, I believe this company will be an
assessments. I'd be surprised if they didn't.
So there you have all eight companies, my expectations for
them we have this busy week ahead.
If you like this type of content make sure you subscribe to the
channel because I'll be doing follow-ups on many of these
earnings reports after they happen.
So I hope you enjoyed. See you in the next one.