American Express, (AXP – Free American Express Stock Report) a Dow-30 component and one of the world's largest issuers of credit cards, reported December-period financial results that were largely in line with our estimates. The shares advanced modestly following the news.
For the quarter, the company achieved revenues of almost $11.4 billion. The top line represented a 9% increase over the year-earlier figure. The healthy gain stemmed from greater card member spending and fees. Consolidated expenses also advanced 9%, to $8.4 billion, which reflected higher reward and other customer-related costs. In sum, the bottom line came in at $2.03 a share, which was just a penny lower than our estimate and 17% better than the prior-year tally.
For full-year 2019, Amex's revenues and earnings reached $43.6 billion and $8.20 per share, which amounted to increases of 8% and 12% compared to 2018, respectively. The stock also performed well in 2019, registering a total return of about 32%.
Looking ahead, we remain bullish in regard to Amex's operations. The company added 11.5 million cards in 2019. This should lead to further advances in card member spending, loans, and fees in 2020 and beyond. Management is also focused on marketing initiatives that will likely generate sizable new customer growth. For this year, we are reiterating our share-net target of $9.00, which is within management's guidance range of $8.85-$9.25. Our estimate would work out to an almost 10% increase over 2019's result. Furthermore, we project that the bottom line will exceed $11.00 per share out three to five years.
Our outlook for the stock remains mixed. The bull market, along with Amex's favorable business prospects and continued share repurchases, may help the equity reach new heights in the near term. However, presently, the issue appears a bit expensive when compared to its historical valuation. Thus, it may not appeal to value-oriented investors. The stock also offers below-average 18-month and three- to five-year appreciation potential.
About The Company: Established in 1850, American Express Company has grown to become a globally integrated payments company. 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
