Are American Express Earnings Enough?

For the fourth quarter, American Express noted an effective tax rate of 35%. Also during this period the company had a return on equity of 29.1% up from 27.8% in the same period from last year.

American Express’ segments, in the fourth quarter, reported net income compared to the previous fourth quarter:

• U.S. Card Services down 23% to $665 million
• International Card Services down 68% to $33 million
• Global Commercial Services increased to $594 million, up from $182 million
• Global Network & Merchant Services up 5% to $417 million
• Corporate and Other reported a net loss of $262 million compared to a net loss of $240 million

Kenneth Chenault, Chairman and CEO, said:

Solid results this quarter reflected the underlying themes that have characterized our performance throughout 2014: higher Card Member spending, increased loan balances, tight control of operating expenses and a substantial return of capital to shareholders through share repurchases.

Fourth-quarter Card Member spending rose 6 percent (8 percent FX adjusted). Volumes for the year crossed the trillion dollar mark for the first time, reflecting the progress we’ve made in building customer loyalty, adding new cards and expanding the network of merchants who accept our products. Loan balances were up 7 percent in the U.S., continuing the progress we’ve made throughout 2014. We continue to see opportunities to grow this portfolio with existing and new customers without significantly changing the overall risk profile of the company.

To look ahead to 2015, we must first look back to September, when Barron’s indicated that American Express is getting higher vendor attraction and customers are using American Express more often, which could lead to higher revenue in the years ahead. Another Barron’s analyst noted that American Express shares could rise as much as 30% in 2015. 24/7 Wall St outlined more cases about what this year may hold for American Express in our Bullish and Bearish case.

Shares of American Express closed up 0.5% at $87.67. In after-hours trading following the earnings report shares were down 2% at $85.98. The stock has a consensus analyst price target of $98.35 and a 52-week trading range of $78.41 to $96.24.

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