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- AXP's customer base continues to spend freely.
- AXP's earnings base is growing strongly each year and industry tailwinds are aiding as well.
- The company's cheap relative and absolute valuations make it a buy.
- American Express is having a difficult time adapting to new realities in the world of payment processing.
- Costco’s decision to drop Amex in Canada shows how inflexible and old fashioned the credit card can be.
- American Express’s inability to develop a mass market card may drive Costco to switch to Capital One.
- American Express is now a niche player in the credit card industry, and that niche could shrink.
- Costco could drop American Express because it needs the middle class customers Amex does not serve.
- This article investigates American Express based on its fundamental attributes and expected earnings growth to create a 12-month target price for its shares.
- Neither the firm's dividend policy nor its balance sheet is particularly impressive, and analysts anticipate annual earnings growth will decline into the single digits over the next five years.
- As a result, American Express shares look to be significantly overvalued at their current price and although Warren Buffett still thinks highly of the company, this model does not agree.
- AXP is suitable for the Enterprising Investor but not the Defensive Investor, following the ModernGraham approach.
- According to the ModernGraham valuation model, the company is undervalued at the present time.
- The market is implying 5.15% earnings growth over the next 7-10 years, which is significantly less than the rate the company has seen in recent years.
Don't Be Deceived - American Express Is Too Pricey
- American Express deserves a premium for its global brand name and solid balance sheet.
- However, organic growth has stalled and EPS is being goosed by expense cuts and buybacks.
- The current price feels like investors are buying American Express as a "safe" stock without examining valuation.
- Investors should dump American Express and look elsewhere.
American Express: Direct Beneficiary Of Growth In The Credit Card IndustryBalanced Investing • Tue, Oct. 28
- American Express reported a growth of 5% in its top line in the most recent quarter and clocked in absolute revenue net of interest expense of $8,329 million.
- The company has increased its net profit margin to 17.73% in the third quarter of the fiscal year 2014, an improvement of 127 basis points.
- On a per share basis, the EPS is projected to go up by $0.49 due to the growth in the credit card industry in 2014.
- With the addition of American Express to provide Apple Pay service, this is expected to provide an additional source of top line growth for the company in upcoming quarters.
- The company’s improved financial and credit performance coupled with the forthcoming industry growth where American Express has a significant market share, the stock provides a good opportunity for investment.
- American Express posted mixed results.
- There was modest growth in revenues and net income.
- The share price is nearing a compelling valuation.
- The stock beat on earnings expectations but missed on revenue.
- The stock appears to be inexpensively valued on 2015 earnings estimates.
- I will more than likely be buying the stock when starting up the new IRA account.
- The whisper number is $1.38, two cents ahead of the analysts' estimate.
- Amex has a 50% positive surprise history (having topped the whisper in 19 of the 38 earnings reports for which we have data).
- The overall average post earnings price move is "opposite" (beat the whisper number and see weakness, miss and see strength) when the company reports earnings.
American Express: Earnings Miss Around The Corner
- A number of one time/special gains are coming to an end.
- Expectations are for accelerated growth but more likely to see deceleration.
- With shares trading at a full multiple the downside move could be brisk.
American Express: Transforming Commerce And Making Members Truly Mobile
- American Express has strategically placed itself as the top player in 'future' card services.
- We are forecasting 4.5% growth but can see that accelerating with the new 'truly mobile' push.
- The business is currently trading at our fair value, but is one to watch - especially when the market turns.
- Apple Pay has the ability to drive massive growth at American Express, especially if Serve functionality is available.
American Express Hopes Consumers Continue To Spend
- American Express's profits correlate strongly to trends in both economic growth and consumer credit.
- With the Federal Reserve looking to raise rates over the next year, consumer spending could begin to decline.
- With a falling dividend payment, investors may find little reason to hold the company's stock if its share price begins to decline.
Apple And American Express - A Match Made In Heaven
- Apple brings on American Express, as well as Visa and MasterCard to prepare for mobile wallet rollout.
- Apple and American Express are both low beta, high performing stocks.
- We think they'd make a great pair trade.
Factors That Make American Express A Risky Short-Term Investment
- AXP is caught in its business model.
- The company is struggling for acceptance among merchants.
- AXP is lacking room for business expansion.
- Over the past month, American Express has experienced a significant drop in its stock price.
- The company compares favorably to its competitors in several key metrics.
- Based on the company's financials, historical growth, and future potential, I believe that American Express is a stock worth considering for long-term investors.
This Warren Buffett Stock Just Presented Fantastic Second Quarter Results
- American Express just presented solid second quarter results.
- The credit card company reported strong underlying profitability and billed business growth.
- American Express is attractively value and a core holding of Warren Buffett.
American Express - Little Appeal At This Point In The Cycle
- American Express reports modest sales growth as global spending trends remain healthy.
- The overall premium valuation is challenging, in my eyes, amidst the reported growth rates and the favorable point in the economic cycle.
- Combined with downside risks related to the account balances if the economy slows, I remain cautious.
- American Express Company ranks 26th on Forbes' list of the world's most valuable brands.
- American Express also has default probabilities in the lowest 5% of all U.S. diversified financials.
- Unlike most "high value" brand firms, American Express bonds ranked in the top 20% by our "best value" ranking. Only 5 bonds offered better value of 252 heavily traded bonds.
Thu, Mar. 6, 11:10 AM
- After its members got bounced from United Airlines' and American Airlines' airport lounges, American Express (AXP +1.2%) is opening their own and trying to one-up the airline clubs with even nicer amenities.
- The booting of AmEx's top members comes amid the merger of United/Continental and American/US Airways, with both moving to give exclusive access to their main credit-card partner, Chase.
- Growing in splendor across the globe, the clubs won't cover their costs, but AmEx sees them as another selling point for their cards.
Thu, Feb. 20, 3:29 PM
- Expecting dividends to grow 49% on average for the banks subject to the Fed's stress tests (about the same as last year), Markit, says Citigroup (C) and Bank of America (BAC) will lead the way with 400% boosts. "They are the last of the major banks paying minimal dividends ... change is overdue."
- While 400% is a big number, Citi and BofA will continue to lag their peers in terms of yield (400% growth on a penny just leads to a nickel).
- Also expected to have a significant pop is Morgan Stanley (MS) - a doubling of the payout to $0.10 per share and a 1.4% yield. Others in the top 5 in increases are Zions Bancorp (ZION) with a 75% boost to $0.07 and Regions Financial (RF) up 67% to $0.05.
- The others: KEY +27%, HBAN +20%, BK +20%, STI +20%, COF +17%, DFS +15%, AXP +13%, STT +12%, JPM +11%, CMA +11%, PNC +9%, USB +9%, GS +9%, FITB +8%, WFC +7%, NTRS +6%, and no soup for BBT and MTB where the dividends are expected to be flat at $0.23 and $0.70 per share, respectively.
- As for ETFs, the dividend jumps are expected to have the biggest impact on the XLF which would see a 25% increase in payout: The ETF has 81 companies, but the top 5 holdings - BofA, Wells, JPM, Citi, USB - make up 41% of assets. In contrast, just two CCAR banks make up the top five holdings of the KBE and it should see a more muted increase of just 18%.
- Related ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, SEF, IYG, FXO, PFI, KBWB, RKH, QABA, FNCL, FINU, KRU, RWW, KBWR, RYF, PSCF, KRS, FINZ
Mon, Feb. 10, 11:00 AM
- American Express (AXP +0.8%) is upgraded to Overweight from Equal weight at Morgan Stanley
- Apollo Global (APO +1.9%) is upgraded to Buy from Neutral at Citi.
- California United Bancorp (CUNB -0.8%) is upgraded to Outperform at RayJay.
- Cape Bancorp (CBNJ +0.9%) is upgraded to Buy at Sandler O'Neill.
- Fifth Third (FITB +0.6%) is upgraded to Positive from Neutral at Susquehanna.
- JPMorgan (JPM) is upgraded to Buy from Hold at SocGen.
- Legg Mason (LM +0.7%) is upgraded to Outperform from Market Perform at KBW.
- Zions Bancorp (ZION +1.6%) is upgraded to Outperform from Sector Perform at RBC Capital.
Thu, Feb. 6, 9:19 AM
Fri, Jan. 17, 1:05 PM
- American Express' (AXP +4.9%) expense management and lower credit losses allowed it to again pull a rabbit out of the hat despite a top line earnings miss, says Goldman's Ryan Nash, reiterating a Neutral rating and $100 price target.
- "We believe the bar for 2014 will likely be higher as its provision will likely be a further headwind (we model 7% increase) and we sensed AXP is less optimistic on large buybacks given the run shares have had." Any upside this year, he says, will have to come from continued expense discipline.
Fri, Jan. 17, 9:00 AM
- We'll keep an eye on the credit card firms following last night's earnings reports from AMEX (AXP) and Capital One (COF).
- Susquehanna is liking American Express - upgrading from Neutral to Positive and raising the price target to $107 from $90 - but cashes in its chips on its long CapOne call, downgrading to Neutral.
- Jefferies boosts its PT on both - AMEX to $88 from $78, and CapOne to $88 from $80.
- AXP +2.1%, COF -2.7% premarket
- AMEX earnings coverage and CC transcript
- CapOne earnings coverage and CC transcript
Thu, Jan. 16, 4:16 PM
- Revenue of $8.5B up 5% Y/Y. Provisions for losses of $528M off 17%.
- Expenses of $6B off 7% Y/Y when adjusted for fx translations, but reflects some extraordinary charges a year ago.
- ROE of 27.8% compares to 23.1% a year ago.
- CEO Chenault notes cardmember spending in Q4 rose 8% despite mixed reports elsewhere about holiday action. U.S. card services net income of $864M vs. $423M a year ago.
- AXP -0.8% AH
- Press release, Q4 results
- CC at 5 ET
Thu, Jan. 16, 4:06 PM
Thu, Jan. 16, 12:10 AM
Wed, Jan. 15, 5:35 PM
Tue, Jan. 14, 9:30 AM| Comment!
Dec. 24, 2013, 10:08 AM
- It's expected, reports the WSJ, American Express (AXP +0.3%) will pay a fine to regulators as well as refunds to customers over slyly charging for add-on products like identity theft protection.
- The CFPC, OCC, and FDIC are expected to join the settlement.
- Update at 10:22: The FDIC, joined by the CFPB and the OCC, announce a settlement with AMEX. It's looking like $7.2M in fines and no less than $40.9N in restitution to AMEC customers.
Dec. 19, 2013, 4:30 PM
- U.S. merchants had filed suits over American Express' (AXP) card acceptance agreements. The settlement, says AMEX, addresses certain merchant concerns, and assures AMEX members will be treated fairly at the point of sale. The suits date back nearly 10 years.
- AMEX will pay attorney fees up to a maximum of $75M, plus another $4M to go to the plaintiffs.
- Merchants agree not to surcharge AMEX customers any more than that charged for cards on competing networks.
- Press release
Dec. 17, 2013, 4:19 AM
- The Fed intends to use its own estimates about the effect of a recession on bank balance sheets in its stress tests. Previously, the Fed has relied on data from the firms themselves.
- The central bank could project that bank assets would grow during a slump, as has happened in the past three recessions, rather than fall, as the banks have predicted.
- With such a finding, the Fed could require banks to hold more loss-absorbing capital or limit shareholder payouts. (Fed letter)
- Tickers: GS, JPM, BAC, BK, AXP, COF, C, FITB, MS, PNC, RF, STT, STI, USB, WFC.
- ETFs of interest: KBE, KBWB, KRE, KCE, KBWC, XLF, IYF, PFI, VFH, RYF, RWW, FAS, UYG, FAZ, SKF, SEF, IAI, FXO, PSCF, KBWD, KBWB, IYG, FINU, FINZ.
Nov. 27, 2013, 1:42 PM
- American Express (AXP +0.4%), Discover (DFS +0.3%), U.S. Bancorp (USB +0.2%), and Wells Fargo (WFC -0.1%) are best positioned to be allowed large capital returns (about 70%) after the Fed's early 2014 stress tests, says Credit Suisse's Moshe Orenbuch, while Ciitgroup (C +0.2%) and PNC Financial (PNC +0.9%) are likely to show the biggest improvement from last year.
- Overall, his team expects large cap bank capital returns to be 65% next year vs. about 48% in 2013. The median dividend payout ratio is expected at 22%, level with this year.
- Orenbuch notes the CCAR will be tougher this time around - notably by assuming a global, not just domestic meltdown, and assuming a significant reversal in the property market - with commercial real estate exposure particularly harshly judged.
- Balanced against that and likely winning, however, are far stronger capital positions of the banks, says Orenbuch.
- Financial and banking ETFs: FAS, XLF, FAZ, UYG, KRE, KBE, VFH, IYF, IPF, SEF, IAI, IAT, IYG, FXO, PFI, IXG, KBWB, RKH, QABA, KCE, FINU, RWW, KRU, RYF, KBWR, AXFN, PSCF, KRS, FNCL, FINZ, KBWX, KBWC
Nov. 20, 2013, 10:04 AM| Comment!
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