On Dec 16, 2015, we issued an updated research report on American Express Company AXP. As a premier brand in financial services with a unique business model, American Express benefits from strong spending growth among its affluent card members.
The company’s revenue generation from international business is expected to accelerate as its cards are accepted at more locations, and when spending in international markets outpaces growth in domestic card spending.
However, the company is experiencing a rise in total expense because of the ongoing business building and re-pricing initiatives along with higher card member reward and service costs.
Also, American Express’ results continue to be significantly affected by a strengthening U.S. dollar. The company expects foreign exchange to have an adverse impact in the fourth quarter and in 2016 too.
An expected increase in expenses as well and currency effects will create pressure on American Express’ earnings as is clearly reflected from its expectation of full-year 2015 EPS of flat-to-modestly down from the prior year. To be more specific, the company projects full-year 2015 EPS between $5.20 and $5.35.
In order to combat these headwinds and secure growth, American Express is working out new and improved products, digital innovation and partnerships around the world.
Recently, the company also entered into a tie-up with Sam’s Club that will to a certain degree make up for the revenue loss from the failed agreement with Costco, which is going to terminate in Mar 2016.
American Express carries a Zacks Rank #4 (Sell). Some better-ranked stocks in this space are Financial Engines, Inc. FNGN, Houlihan Lokey, Inc. HLI and StoneCastle Financial Corp. BANX. Each of these stocks carries a Zacks Rank #2 (Buy).
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