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American Express (AXPFree American Express Stock Report), the provider of charge and credit card payment products, has reported healthy first-quarter results. Share earnings were $1.07 in the March period, $0.03 better than our estimate and 10% higher than the comparable 2011 tally. Total revenues were $7.6 billion, in line with our call, and 8% better than the year-earlier tally. The solid top-line advance mostly reflected continued strong growth in cardmember spending and elevated travel commissions and fees. The consolidated provision for loan losses totaled $412 million, up from $97 million a year ago. However, the increase reflected a large reserve release, rather than reduced credit quality or materially higher net charge-offs. In fact, credit quality remains at a very high level. Investors took the report in stride, and the stock was little changed, though down slightly, in aftermarket trading.

Looking ahead, we continue to like American Express' near- and long-term prospects. Although the stock market has been volatile of late, a slew of reports have signaled that the U.S. economy is improving, which should benefit the credit card behemoth. We expect that cardmember spending will continue to increase at a healthy rate over the next few years. In addition, Amex's customers generally possess good credit scores, and we look for the provision for loan losses to remain at a very manageable level. Improvements to the housing and job markets will likely also be beneficial to the company's credit card and travel businesses.

For 2012, due to the first-quarter outperformance, we are adding a nickel to our share-earnings estimate, which now stands at $4.40. If achieved, that would represent a year-over-year increase of approximately 8%. We are also introducing a 2013 bottom-line estimate of $4.80 a share. Our long-term outlook is favorable, as well, and we project that earnings will exceed $6.00 by the 2015-2017 time frame.

As for the stock, the price has increased more than 10% since our mid-February full-page report. However, we still think it is undervalued. The equity is currently trading at an attractive price-to-earnings ratio (just 13.2 times our 2012 share-net estimate). In addition, looking long term, we project worthwhile appreciation potential to 2015-2017. A well-covered dividend adds to its appeal. Lastly, conservative investors may want to take a look at this Dow-30 component. American Express shares carry a Safety Rank of 2 (Above Average), and the company's Financial Strength score is 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.