American Express, (AXP – Free American Express Stock Report) a Dow-30 component and one of the world's largest issuers of credit/charge cards, has reported December-period financial results. For the quarter, the company achieved adjusted share earnings of $1.74, which excluded $0.58 of tax-related benefits. Although this figure was 9% higher than the year-earlier figure, it came in below the consensus Wall Street analyst estimate, as well as our call of $1.82. Amex's stock is down modestly in pre-market action following the release.
Although the earnings figure was modestly disappointing, there was some good news in the quarterly report. Total revenues net of expenses were $10.5 billion, or 8% higher than the previous year's tally. The healthy increase stemmed from greater card member spending, loan volumes, and card fees. On the other hand, consolidated expenses climbed 9%, to $7.7 billion, which reflected higher rewards costs and marketing initiatives. Also, the provision for loan losses was up 14%, to $954 million. The rise was attributed to growth in the loan portfolio and an increase in the lending write-off rate. Credit quality, however, remained high and, in our view, should not be much of a concern at this juncture. For the full year, American Express performed quite well and achieved total revenues and earnings of $40.3 billion (up 21% year over year) and $7.32 a share (+24%), respectively.
Looking ahead, we remain bullish in regard to Amex's operations. As the last several quarters have demonstrated, management has done a fine job when it comes to expanding the company's footprint and revenue base. It has aggressively implemented marketing endeavors and technology improvements, which should continue to bear fruit. For 2019, management's guidance points to revenue growth of 8%-10% and earnings per share of $7.85-$8.35. Those ranges are similar to our existing top- and bottom-line estimates of $43.0 billion and $8.15, respectively. We also project that earnings will reach $9.50 by the 2021-2023 time frame.
Our outlook for the stock remains mixed. Although we view the company's business prospects as favorable, a good deal of the good news appears to be already reflected in the stock price. As such, average annual total-return prospects appear unexciting. That said, the issue is top-ranked for Safety and holds other defensive properties. Thus, it may interest conservative accounts, especially during this period of heightened market volatility.
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
