Banking, finance, and taxes

Is American Express Back in Favor After Earnings?

Chris Lange

Published: April 21, 2016 12:05 pm

Last Updated: January 13, 2020 10:28 am

American Express Co. (NYSE: AXP) reported its first-quarter earnings report after the markets closed on Wednesday. The credit card giant said it had $1.45 in earnings per share (EPS) on $8.09 billion in revenue. The Thomson Reuters consensus estimates had called for $1.35 in EPS on revenue of $7.99 billion. In the same period of last year, Amex posted EPS of $1.48 and $7.95 billion in revenue.

A fair number of analysts were impressed by these results and decided to pour into the stock. We have included an analyst montage detailing how they view this stock after earnings.

During the most recent quarter, investment spending was up significantly, reflecting what management believes to be initiatives to grow the business by expanding its membership base and gaining a greater share of their overall spending and borrowing.

Amex reported the following segment results for the first quarter:

• U.S. Card Services reported net income of $694 million, up 5% from $659 million a year ago.
• International Card Services reported net income of $188 million, down 5% from $197 million a year ago.
• Global Commercial Services reported net income of $485 million, down 6% from $517 million a year ago.
• Global Network & Merchant Services reported net income of $357 million, down from $369 million a year ago.
• Corporate and Other reported a net loss of $298 million. This compared to a net loss of $217 million a year ago.

First quarter results were in line with the financial outlook we provided last month at our Investor Day. Despite strong competition throughout the payments industry, we generated a 4% increase in FX-adjusted revenues. Those revenues reflected strong, underlying growth in our lending portfolio, along with higher Card Member spending and fee income. Our 6 percent rise in Card Member spending was partially offset by a lower merchant discount rate and the higher costs associated with cash back rewards.

On the books, the company had $25 billion in cash and cash equivalents at the end of the quarter, compared to $24 billion in the same period last year.

A few analysts weighed in on Amex after the company reported earnings:

• BMO has a Market Perform rating and raised its price target to $76 from $71.
• D.A. Davidson raised its price target to $67 from $66.
• Goldman Sachs has a Neutral rating and lowered its price target to $62 from $64.
• Jefferies has a Hold rating and raised its price target to $60 from $58.
• KBW raised its price target to $74 from $67.
• Nomura has a Neutral rating and raised its price target to $62 from $56.
• RBC has an Underperform rating and lowered its price target to $57 from $58.
• Susquehanna has a Positive rating but lowered its price target to $78 from $87.

Shares of Amex were traded up 1.1% to $65.73 on Thursday, with a consensus analyst price target of $64.75 and a 52-week trading range of $50.27 to $81.92.