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American Express (AXPFree American Express Stock Report), a provider of charge and credit card payment products, has reported healthy second-quarter financial results. For the period, share earnings were $1.15, $0.02 better than our estimate and a nickel higher than Wall Street's consensus expectation. The bottom line tally was more than 7% higher than the comparable 2011 figure. Total revenues were almost $8 billion, up 5% year over year. The top-line advance mostly stemmed from continued growth in cardmember spending, as well as greater net interest income. The consolidated provision for loan losses totaled $461 million, up from $357 million a year ago. This increase was mostly attributed to higher reserve releases in the year-earlier period, partially offset by lower net charge-offs during the most recent interim. Overall, credit quality remains at a very high level. Nonetheless, the stock moved modestly lower in after-market trading on the report, as cardmember spending grew at a slower rate than some investors had been expecting.

Looking ahead, we continue to like American Express' prospects. Although there are widespread concerns in regard to the economy, both at home and abroad, we expect that cardmember spending will continue to increase at a healthy rate over the next several years. Furthermore, Amex's customers generally possess good credit scores, and we look for the provision for loan losses to remain at a very manageable level. Any meaningful improvement in the U.S. housing and/or job markets will likely also be beneficial to the credit card behemoth's top and bottom lines.

For 2012, we are keeping our share-net estimate unchanged at $4.40, which would represent an almost 8% year-over-year increase. We are also reaffirming our 2013 call, which stands at $4.85 a share. Our long-term outlook remains favorable, as well, and we project that earnings will exceed $6.00 by the 2015-2017 timeframe.

As for the stock, after performing well during the first few months of the year, it has traded sideways since our last full-page report dated May 18th went to press. Looking long term, we project worthwhile appreciation potential to 2015-2017. A well covered dividend adds to the appeal of this Dow component, as well. Lastly, Amex shares may be of particular interest to conservative investors. This stock carries an Above Average rank for Safety (2) and the company possesses our top grade for Financial Strength (A++).

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.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.