American Express (AXP – Free American Express Stock Report), a Dow-30 component and one of the world's largest providers of credit cards, has reported March-period financial results. For the quarter, share net came in at $1.34, which was a few pennies above our estimate, but 8% lower than the year-earlier tally. The year-over-year decline mostly stemmed from elevated cardmember, marketing, and promotional expenses. In addition, the consolidated provision for losses was $573 million, up 32% from a year ago. Lastly, quarterly revenues fell 2%, to $7.9 billion. On the bright side, adjusted cardmember spending increased 8% and the company added 2.6 million new cards during the March period. Following the earnings release, shares of American Express were up nicely.
Our near-term outlook for American Express remains unexciting. The company continues to navigate life after losing transaction exclusivity with Costco (COST). Offsetting this business will not be easy, although management has already implemented a number of new strategies, including increasing the marketing budget and its technology. All told, we agree with management's approach, but it will likely lead to increased operating costs this year. For 2017, we are reiterating our share-net estimate of $5.65, which is at the low end of management's guidance, and would represent a narrow year-over-year increase of just two pennies.
As for the equity, after trading at a depressed level for some time, it has perked up of late. In fact, over the past six months, the stock price has advanced more than 20%. This sharp increase, in our view, has reduced the issue's investment appeal. Thus, we recommend that interested investors wait on the sidelines for a better entry point.
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.