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 June-period financial results that were in line with our estimates. The stock price was down modestly following the earnings release.
For the quarter, the company achieved revenues of roughly $10.8 billion, close to our call of $10.9 billion. The top line represented an 8% increase over the year-earlier figure. The healthy gain mostly stemmed from greater cardmember spending, loan volumes, and fee income. Expenses were $7.8 billion, up 9% year over year, which reflected higher reward costs and the company's marketing initiatives. In sum, the bottom line came in at $2.07 a share, which was $0.02 higher than our forecast and 13% better than the prior-year tally.
Looking ahead, we remain bullish in regard to Amex's operations. The company was able to add 2.9 million cards during the June quarter. 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 $8.20, which fits nicely within management's guidance range of $7.85-$8.35. Our call works out to a 12% increase over 2018's results.
Our outlook for the stock is mixed. The company's healthy business prospects, along with the current strength of the stock market, may help the equity reach new heights in the near term. That said, AXP shares are certainly not inexpensive. The stock price has advanced almost 35%, year to date, and is now trading at a rather rich valuation compared to its historical record. Thus, it may not appeal to value-oriented investors, and the issue offers below-average three- to five-year price appreciation potential.
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
