Banking, finance, and taxes

Is This the Turning Point for American Express?

Chris Lange

Published: July 20, 2016 4:33 pm

Last Updated: January 13, 2020 5:30 am

American Express Co. (NYSE: AXP) has made solid progress on its 2016 growth initiatives thus far. The company’s earnings and outlook seem to imply that things can only get better from here. Overall this was a fairly positive report despite mixed earnings.

The company said that it had $2.10 in earnings per share (EPS) on $8.24 billion in revenue. There were consensus estimates from Thomson Reuters that called for $1.95 in EPS on $8.4 billion in revenue. The same period from last year had $1.42 in EPS on $8.28 billion in revenue.

So far in 2016, the company returned a record amount of capital to shareholders, with share repurchases totaling $1.7 billion in the second quarter and a record $2.8 billion year to date. With the completion of the Fed’s annual stress test, Amex now plans to increase the quarterly dividend by 10% to 32 cents per share and repurchase up to an additional $3.3 billion shares over the next four quarters.

The company expects 2016 results to be at the high end of the range that it shared earlier this year, which was $5.40 to $5.70 in EPS. The expectations for 2017 remain unchanged (at least $5.60 in EPS). The consensus estimates for 2016 and 2017 are $5.55 and $5.55, respectively. Amex management says that it will stay focused on accelerating revenue growth, resetting its cost base and optimizing the investments it’s making in the business.

In terms of the segment results the company reported:

• U.S. Consumer Services posted second-quarter net income of $1.1 billion, up 74% from $613 million a year ago.
• International Consumer and Network Services reported second-quarter net income of $228 million, up 18% from $193 million a year ago.
• Global Commercial Services reported second-quarter net income of $576 million, up 5% from $550 million a year ago.
• Global Merchant Services reported second-quarter net income of $373 million, up 1 percent from $369 million a year ago.
• Corporate and Other reported second-quarter net loss of $229 million compared with net loss of $252 million a year ago.

Kenneth I. Chenault, Chairman and CEO, commented on earnings:

During the quarter, we again made substantial investments in marketing and technology to help grow the business. At the same time, operating expenses continued to be well managed, and we moved forward aggressively with plans to take $1 billion out of our cost base on a run-rate basis by the end of 2017.

Shares of Amex closed Wednesday at $64.48, with a consensus analyst price target of $67.64 and a 52-week trading range of $50.27 to $81.66. Following the release of the earnings report the stock was up 2% at $65.76 in the after-hours trading session.