American Express (AXP – Free American Express Stock Report), a Dow-30 component and one of the world's largest providers of credit cards, has reported December-period financial results. For the quarter, share earnings were $0.88, which was well below our expectation, as well as Wall Street's consensus estimate. Increased marketing and promotional expenses were the main culprits behind the lower-than-expected earnings. What's more, revenues came in at $8.0 billion, which was 4% below the year-earlier tally. Most of that decline stemmed from the absence of Costco-related business. Following the quarterly financial release, shares of American Express were down slightly in after-market trading.
Looking near term, we think that the company will continue to post unexciting results. Offsetting the loss of Costco will not be easy, although management has already implemented a number of new strategies, including lowering costs and increasing investment in marketing and technology upgrades to attract new card members. All told, we continue to agree with management's approach, though it will certainly take time for these endeavors to bear fruit. For 2017, our share-net estimate is currently $5.65, or just two pennies above the 2016 tally.
As for the equity, after trading at a depressed level for some time, it has perked up of late. More specifically, over the past three months, the stock price has advanced about 25%. This sharp increase has offset much of the earnings growth we expect over the long term, assuming management's strategies are successful. All told, at the current quotation, AXP shares do not stand out for the short or long term.
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.
