SA News • Yesterday, 4:08 PM
- American Express is down $10 a share from our entry price. Nevertheless we are staying the course and holding this stock long term.
- We will not be shorting stocks in our 1% portfolio. There are many more "long" millionaires than "short."
- Our new position, BND, is performing well. It will be a good anchor for our portfolio as its volatility seems to be very low.
American Express Not Dead Yet, Looks Very Cheap Here
- AXP reported results on Wednesday night and disappointed investors.
- The company announced 4,000 layoffs in a surprise move and took a huge build against future credit losses.
- I still like AXP as the stock is very cheap despite the negatives from the quarter.
Update: American Express - Don't Throw This Credit Card Company Away Just Yet
- American Express has produced a negative stock return of 3% over the last twelve months.
- My long-term investment thesis from last year revolved around two themes: Strong revenue/billed business growth and a low valuation.
- American Express' fourth-quarter results confirm my investment thesis, even though the stock has underperformed my expectations.
- Looking forward, the potential for revenue and valuation growth remains attractive.
- American Express recently released its 4th quarter earnings.
- The company grew EPS 14% for full fiscal 2014, thanks in part to the Concur Technologies gain.
- American Express is offering investors a total return going forward of between 8% and 11% a year.
American Express' Shares Are Falling Following Its Q4 Earnings Beat - Should You Buy Now?
- Q4 2014 earnings were released on January 21.
- Earnings per share and revenue beat expectations.
- Card Member spending increased 6%.
- The stock has responded by falling about 2%.
- The whisper number is $1.39, one cent ahead of the analysts' estimate.
- Amex has a 51% positive surprise history (having topped the whisper in 20 of the 39 earnings reports for which we have data).
- The overall average post earnings price move is 'positive' (beat the whisper number and see strength, miss and see strength) when the company reports earnings.
- 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 • Oct. 28, 2014
- 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: Mixed Results But Still A Decent 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.
Yesterday, 4:08 PM
Thu, Jan. 22, 9:32 AM
- American Express (NYSE:AXP) is lower by 3.3% after the company last night said it would eliminate 4K jobs (about 6% of the U.S. workforce). The company has been able to meet or beat bottom-line earnings estimates by controlling expenses, but has been falling short of its long-term revenue growth target of 8%.
- "Headwinds present a challenging environment for American Express," says Jefferies' John Hecht, noting the discount rate - what AmEx collects on each transactions from merchants - edged lower in Q4.
- As for costs last quarter, they rose 6% when adjusted for forex impacts, and though layoff announcements have neared 12K over the past two years, the overall headcount has remained relatively steady at between 61K and 63.5K since 2010.
- Previously: AmEx beats, reportedly planning thousands of job cuts (Jan. 21)
Wed, Jan. 21, 4:15 PM
- Q4 net income of $1.447B or $1.39 per share vs. $1.308B and $1.21 one year ago. Share count fell 4% Y/Y. ROE of 29.1% vs. 27.8%.
- U.S. Card Services net income of $665M down 23% Y/Y on revenue of $4.6B up 5%, with cardmember spending up 8%. Loss provisions of $399M up 25% thanks to a reserve build this year vs. a reserve release last year. Expenses of $3.1B up 13%.
- International Card Services net income of $33M down 68% Y/Y on revenue of $1.4B down 3% (FX adjusted). Expenses of $1.3B up 10% (FX adjusted).
- Global Commercial Services net income of $594M up from $182M a year ago.
- Global Network & Merchant Services net income of $417M up 5% Y/Y.
- Conference call at 5 ET. The company is reportedly planning thousands of job cuts this year - it took a $313M charge this quarter "to improve operating efficiencies."
- Previously: American Express beats by $0.01, beats on revenue (Jan. 21)
- AXP -1.4% after hours
Wed, Jan. 21, 4:10 PM
Tue, Jan. 20, 5:35 PM
Tue, Jan. 20, 3:36 PM
- "I can cut a lot of expenses and we can look pretty good for a year or two, but then our business goes away," said American Express (AXP +1.5%) CEO Ken Chenault recently. His comments speak to the fine line the company must walk to please both customers and its owners, some of who may be noticing AmEx common stock has lagged its main card-processing competitors Visa and MasterCard over the last one, three, and five years, writes Spencer Jakab in the WSJ.
- Wednesday's Q4 results (after the bell) are expected to show progress on the cost front and the benefit of a strong holiday season, with analysts expected EPS of $1.28, up from $1.21 a year earlier.
- The company's main profit center is still the U.S., with less than half of its cards in 2013, but generating a far higher proportion of so-called discount revenue from merchants that year.
- "Convenience and quality don’t come cheap - and still may not trump ubiquity," concludes Jakab.
Wed, Jan. 7, 7:35 AM
- Upgrading American Express (NYSE:AXP) to a Buy with $102 price target, analyst Ryan Nash says an improving macro should drive revenue upside. He also notes increased customer acquisition, share gains in lending, growth from a number of key long-term initiatives, and operating expense containment.
- His numbers are 2% higher than the Street for 2014, and 3% higher this year, and shares trade at 13.1x 2016 estimates vs. 15.3x for peers.
- The stock's higher by 1% premarket.
Dec. 18, 2014, 10:09 AM
- "We believe that American Express' (AXP +2%) recent broader inclusion initiatives are likely to take some time to develop and that top-line growth is likely to be constrained in the near term," says Jefferies, initiating coverage with a Hold and $95 price target.
- Initiatives like OptBlue and Serve look good over the longer-term, but come at a short-term cost which is likely to weigh on results in coming quarters. The $95 price target equates to about 15x the firm's 2016 EPS estimate - a warranted discount to peers thanks to AmEx's smaller scale and lower merchant acceptance, as well as credit risk exposure.
- Previously: AmEx initiated with Overweight rating at Morgan Stanley (Dec. 17, 2014)
Dec. 17, 2014, 9:52 AM
- Analyst Cheryl Pate expects accelerated U.S. card spend driven by 1) Ramping consumer spending, and 2) Higher merchant penetration through OptBlue. American Express (AXP +0.5%), she says, is highly leveraged to an improving economy and a higher stock market thanks to its "more affluent" client base.
- Opt Blue, she adds, offers a "meaningful value proposition" to small merchants which could result in AmEx narrowing the merchant gap with competitors.
- Alongside the Overweight rating is a $110 price target.
Dec. 10, 2014, 2:31 PM
- American Express (AXP -0.2%) CEO Ken Chenault is pleased with spending trends this season, and says Cyber Monday was the single largest billings day in company history.
- Presenting at the Goldman Sachs financial services conference, Chenault also gives the thumbs up to AmEx's participation thus far with Apple Pay. “Our cardmembers have a great affinity for Apple products and service. They are power users and, as you can expect, they are already highly engaged with Apple Pay."
- Presentation slides
Dec. 2, 2014, 2:59 PM
Nov. 26, 2014, 3:16 PM
- The partnership with Costco is particularly important for American Express' (NYSE:AXP) B2B franchise, says the team at Susquehanna, noting 75% of Costco spending is from its Executive Members, i.e. small business owners. AmEx's strength in small business cards thus owes a lot to the tie-up with Costco, according to the team, especially as AmEx tries to boost merchant "acceptance" (it currently ranks below Visa, MC, and Discover on that front).
- Previously: Costco ditches AmEx in Canada
Nov. 13, 2014, 9:49 AM
- Capital One (COF +0.8%) in an outlier to the upside in the credit card names in early action after Deutsche Bank initiates coverage on the stock with a Buy and $92 price target. American Express (AXP -0.2%) is started at Hold.
- Deutsche cuts Discover FInancial (DFS -0.4%) to Hold from Buy, citing valuation and high expectations for loan growth which the company could find tough to meet. CapOne, says Deutsche, offers a better risk/reward.
Nov. 10, 2014, 3:39 PM
- The lucrative prepaid card business may already getting less so thanks to the entrance of gorillas like JPMorgan (NYSE:JPM) and American Express (NYSE:AXP) into the industry, but alongside that threat is the CFPB.
- Unable to cap fees, the fast-expanding D.C. agency is set this week to propose new rules mandating clearer disclosure of fees, and to make it easier for consumers to compare across cards.
- “We’re generally in compliance with what we expect the regulation to be,” says Meta Financial (NASDAQ:CASH) President Brad Hanson, and he believes the better disclosure "helps legitimize the industry."
- Around 8% of U.S. households use prepaid cards, but that rises to 22% when just looking at those without bank accounts. Less than a $20B business six years ago, the amount put on prepaid cards should near $100B this year.
Nov. 5, 2014, 12:02 PM
- "We want to become the company that will put us out of business," says American Express (AXP +0.6%) chief Ken Chenault, speaking about the importance of competition and innovation at the Money 2020 conference in Las Vegas.
- "You have to have this spirit of reinvention, and that is what we have in the DNA of the company, ... if you don't innovate, you die. You have to constantly innovate, you have to constantly challenge the status quo."
- On whether Apple might one day do an end run around card processors: "Does Apple want to be involved in credit and all that goes with that ... I don't think so."
- On the pending launch of Current C - a mobile app connecting to a rival network (Merchant Customer Exchange) created by a group of major retailers: "We still don't know what Current C will consist of," he says, reminding that what merchants really want is to grow sales and will Current C provide shoppers with the right incentives to do so.
Oct. 31, 2014, 8:35 AM
- American Express (NYSE:AXP) looks set to escape the full force of the new measures, reports Bloomberg, as it would only have to comply with the fee caps when it works with other companies to issue cards.
- The proposal being circulated would cap interchange fees on cross-border debit-card payments at 0.2% and credit-cards at 0.3%. For domestic debit-card payments, the plan gives nations the options of calculating the 0.2% cap against the value of individual transactions, or against the "annual average transaction value."
- According to the proposal, AmEx and other three-party systems would be affected only when they have licensing agreements with other providers - a model accounting for about 9% of the firm's business, according to EU data.
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