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American Express (AXP - Free Analyst Report), the provider of charge and credit card payment products, has reported better-than-expected financial results for the September quarter. For the period, share earnings were $0.90, a dime better than our estimate and 67% higher than the year-earlier tally.

Largely responsible for the bottom-line advance was a material drop in the company's provision for loan losses. For the September interim, the provision was $373 million, down from $1.2 billion in the prior year, reflecting continued improvement in credit quality for AXP's charge and credit card portfolios. The top line advanced 17%, to roughly $7 billion, helped by the consolidation of some cardmember loans and related debt. Revenues also included higher cardmember spending and increased travel commissions and fees.

Looking ahead, we have increased our share-net forecast for 2010, owing mostly to the strong third-quarter performance. In addition, we are raising our December-period bottom-line estimate by a nickel, to $0.88 a share. Although the U.S. housing market is weak and the unemployment rate remains near 10%, spending levels will probably increase over the next several quarters. Too, American Express' provision for loan losses should recede further from the elevated levels reached during the downturn. All told, we now look for 2010 share net of $3.35, more than double 2009's depressed tally.

For 2011, we anticipate additional cardmember spending increases and a further decrease in the provision for loan losses, which should aid the bottom line. Any improvements in the housing market or the employment picture would also help the company's profit potential. In all, we've added $0.15 to our bottom-line estimate for next year, to $3.65 a share, which would represent a 9% advance from 2010's projected tally.

Although American Express has solid business prospects, the issue lacks appeal at this time, since we only expect it to keep pace with the broader market in the year ahead. Further, due to the substantial share-price run over the past 18 months, AXP has just average appreciation potential to 2013-2015. The possibility of further regulatory and legislative changes adds an element of risk here, as well.

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.