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Category: Stock Market and American Express
Date: 20 October 2019 Stock Price: $116.76 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of American Express, a leading global payments company that provides personal and business credit and travel cards with $83.7 billion in total loans issued.
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About American Express
American Express is a globally integrated payments company, providing customers with access to products, insights and experiences that enrich lives and build business success.
Overview of American Express' latest earnings report
Data below refers to quarterly data unless specified otherwise:
- Total revenues: $10.989 billion (up from $10.144 billion for the same period of the previous year)
- Revenues increased by 8% over the last 12 months
- Expenses: $7.844 billion (up from $7.209 billion for the same period of the previous year)
- Expenses increased by 9% over the last 12 months
- Net earnings: $1.723 billion (up from $1.621 billion for the same period of the previous year)
- Diluted earnings per share: $2.08 (up from $1.88 for the same period of the previous year)
- PE ratio: 14.3
- Dividend declared: $0.43 (up from $0.39 for the same period of the previous year)
- Dividend yield: 1.47%
- Dividend yield: 1.47%
- Diluted weighted-average shares outstanding: 827 million (down from 860 million for the same period of the previous year)
- Cash and cash equivalents: $24 billion
- Cash and cash equivalents per share: $29.03
- Cash and cash equivalents makes up 24.8% of American Express' market capital
- Cash and cash equivalents makes up 12.37% of American Express' total assets
- Card member loans: $81 billion
- Card member loans makes up 41.7% of American Express' total assets
- Stockholders equity in American Express: $23.0 billion
- Stockholders equity per share: $27.8
- So American Express is trading a 4.17 times its stockholders equity which is outside the expected range of between 2 and 4 which most firms ten to trade at.
American Express' management commentary on the results
American Express Company (NYSE: AXP) today reported third-quarter net income of $1.8 billion, up 6 percent from $1.7 billion a year ago. Diluted earnings per share was $2.08, up 11 percent from $1.88 per share a year ago.
“Our results continued the steady performance we’ve been delivering for several years now, marking the 9th straight quarter of FX-adjusted revenue growth of at least 8 percent,” said Steve Squeri, chairman and chief executive officer. “I’m pleased with the breadth and consistency of our revenue growth, driven by a well-balanced mix of Card Member spending, loans and membership revenues from our fee-based products, which grew 19 percent and exceeded $1 billion this quarter for the first time.
“The trends we saw in the business this quarter continue to be consistent with an economy that continues to grow, albeit at a more modest pace than last year. FX-adjusted proprietary Card Member spending rose 7 percent, led by strong consumer growth in both the U.S. and International markets. Our loan portfolio grew 9 percent, with over 60 percent of that growth again coming from existing Card Members. Credit quality metrics remained at industry-leading levels.
“The disciplined approach we’ve been taking for the past few years to refresh our products continues to translate into increased engagement with existing customers and a redefinition of membership with new benefits, broader access to lifestyle experiences and more customized rewards. Card Members appreciate the added value we are providing, which is helping us earn a greater share of their overall spending and borrowing, while also attracting 2.9 million new proprietary Card Members to American Express this quarter.
“I feel very good about our ability to continue delivering high levels of revenue growth and double-digit EPS growth. We are reaffirming our 2019 EPS guidance range and expect revenue growth of 8 to 10 percent for the fourth quarter.”
The image below shows American Express' 2019 fiscal guidance
“Our results continued the steady performance we’ve been delivering for several years now, marking the 9th straight quarter of FX-adjusted revenue growth of at least 8 percent,” said Steve Squeri, chairman and chief executive officer. “I’m pleased with the breadth and consistency of our revenue growth, driven by a well-balanced mix of Card Member spending, loans and membership revenues from our fee-based products, which grew 19 percent and exceeded $1 billion this quarter for the first time.
“The trends we saw in the business this quarter continue to be consistent with an economy that continues to grow, albeit at a more modest pace than last year. FX-adjusted proprietary Card Member spending rose 7 percent, led by strong consumer growth in both the U.S. and International markets. Our loan portfolio grew 9 percent, with over 60 percent of that growth again coming from existing Card Members. Credit quality metrics remained at industry-leading levels.
“The disciplined approach we’ve been taking for the past few years to refresh our products continues to translate into increased engagement with existing customers and a redefinition of membership with new benefits, broader access to lifestyle experiences and more customized rewards. Card Members appreciate the added value we are providing, which is helping us earn a greater share of their overall spending and borrowing, while also attracting 2.9 million new proprietary Card Members to American Express this quarter.
“I feel very good about our ability to continue delivering high levels of revenue growth and double-digit EPS growth. We are reaffirming our 2019 EPS guidance range and expect revenue growth of 8 to 10 percent for the fourth quarter.”
The image below shows American Express' 2019 fiscal guidance
American Express (NYSE: AXP) stock price history
The image below, obtained from Google, shows the stock price history of American Express over the last 5 years. And it's been a pretty good time for American Express stockholders. 5 years ago the stock was trading at around $86.40 a stock and its currently trading at $116.76 a stock. That's a decent return of 35.1% provided to American Express stockholders over the last 5 years.
The stock of American Express is trading at a lot closer to its 52 week high of $129.34 than it is to its 52 week low of $89.05, which to us is an indication that the short term sentiment and momentum of American Express' stock is positive at this point in time.
The stock of American Express is trading at a lot closer to its 52 week high of $129.34 than it is to its 52 week low of $89.05, which to us is an indication that the short term sentiment and momentum of American Express' stock is positive at this point in time.
Recent coverage of American Express
The extract below discusses some of the latest news regarding American Express as obtained from Thestreet.com
American Express (AXP - Get Report) said Friday that record-setting card fees helped the credit card giant beat Wall Street's third-quarter earnings expectations. Shares, however, were down nearly 1.9% to $116.83. The New York-based company reported net income of $1.76 billion, or $2.08 a share, up from $1.65 billion, or $1.88 a share a year ago, and ahead of analysts' calls for earnings of $2.03 a share. Revenue rose 8% to $11 billion and topped Wall Street's forecast for $10.94 billion.
The increases reflected higher card member spending, net interest income and card fees. Revenue from card fees rose 17% to a record $1.03 billion, the company said, beating analysts' estimates of $1.01 billion.Consumer services revenue rose 11% to $5.4 billion, commercial services grew 7% to $3.4 billion and merchant and network services revenue increased 5% to $1.7 billion. American Express also reaffirmed its fourth-quarter earnings-per-share guidance and expected revenue growth of 8% to 10%. For 2019, the company expects earnings of $7.85 to $8.35 a share. Analysts are looking for earnings of $8.01 a share.
Read the full article here
American Express (AXP - Get Report) said Friday that record-setting card fees helped the credit card giant beat Wall Street's third-quarter earnings expectations. Shares, however, were down nearly 1.9% to $116.83. The New York-based company reported net income of $1.76 billion, or $2.08 a share, up from $1.65 billion, or $1.88 a share a year ago, and ahead of analysts' calls for earnings of $2.03 a share. Revenue rose 8% to $11 billion and topped Wall Street's forecast for $10.94 billion.
The increases reflected higher card member spending, net interest income and card fees. Revenue from card fees rose 17% to a record $1.03 billion, the company said, beating analysts' estimates of $1.01 billion.Consumer services revenue rose 11% to $5.4 billion, commercial services grew 7% to $3.4 billion and merchant and network services revenue increased 5% to $1.7 billion. American Express also reaffirmed its fourth-quarter earnings-per-share guidance and expected revenue growth of 8% to 10%. For 2019, the company expects earnings of $7.85 to $8.35 a share. Analysts are looking for earnings of $8.01 a share.
Read the full article here
American Express (NYSE: AXP) latest stock valuation
So what is American Express stock worth based on the release of their latest earnings report? Based on American Express' latest earnings report our valuation models provide a target (full value) price of American Express stock at $134.10 a stock (up slightly from our 2nd quarter 2019 earnings review of American Express). Therefore we believe the stock of American Express is undervalued at its current price of $116.76.
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target (full value) price which in this case is $134.10, so a good entry point into American Express' stock would be at $120.70 or below. Considering the fact that American Express is trading at below our suggested entry point into the group's stock we rate American Express as a buy.
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target (full value) price which in this case is $134.10, so a good entry point into American Express' stock would be at $120.70 or below. Considering the fact that American Express is trading at below our suggested entry point into the group's stock we rate American Express as a buy.
Next earnings release date for American Express
It is expected that American Express will release their 4th quarter 2019 earnings report will be released in late January 2020