American Express (AXP – Free American Express Stock Report), a Dow-30 component and one of the world's largest issuers of credit/charge cards, reported mixed March-period financial results. The stock price declined modestly following the news.
For the quarter, the company achieved revenues of roughly $10.4 billion, which was in line with our estimate and represented a year-over-year increase of 7%. The healthy gain mostly stemmed from greater cardmember spending, loan volumes, and fee income. However, expenses increased 11%, to $7.6 billion, which reflected higher reward costs and marketing initiatives. In sum, the bottom line came in at $1.80 a share, which was below our estimate and $0.06 less than the year-earlier tally.
Looking ahead, we remain bullish in regard to Amex's operations. Although the March quarter was hampered by increased marketing costs, the company was able to add 3.1 million cards during the three-month period. This should lead to further advances in cardmember spending, loans, and fees. For full-year 2019, we are keeping our share-earnings estimate unchanged at $8.15, which is a penny above the high end of management's range ($7.64-$8.14). Our call works out to an 11% increase over 2018's results.
Our outlook for the stock remains mixed. Although we view the company's business prospects as favorable, a good deal of the upbeat news looks to already be reflected in the equity. In fact, the stock price has advanced about 18%, year to date. At the current quotation, average annual total-return prospects appear unexciting. That said, the issue is top-ranked for Safety (1) and holds other defensive properties. Thus, it may interest conservative accounts.
About The Company: Established in 1850, American Express Company has grown to become a leading global payments, network, and travel firm. It operates through multiple business segments, including the Global Consumer Group and Global Business-to-Business Group. The company sold its AMEX Life business in October of 1995 and its American Express Bank in February of 2008. In mid-1994, it spun off Lehman Brothers to shareholders and ten years later, did the same with American Express Financial Advisors.
- Ian Gendler
