American Express Co. (AXP): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

By
A A A

Summary:
American Express benefits from improved credit trends, new business initiatives, capital flexibility and stable ratings, paved the way for an above-average payout ratio. The company's first-quarter earnings outperformed the Zacks Consensus Estimate, primarily driven by increased card member spending, lower expenses, and improved performance in the U.S. These factors drove the ROE and book value, although loan loss provisions were higher. However, lower borrowing on cards along with rising payment of outstanding debt may raise interest expense and impede loan fee income. We also remain cautious about the scope of expense growth given the impact of regulations and lawsuits. Overall, a spend-centric business model and healthy capital warrant enhanced growth over time, justifying our Neutral recommendation.

Overview:

Founded in 1850, New York-based American Express Company is a diversified financial services company, with worldwide operations and a strong brand name. It is a significant player in charge and credit payment card products, and travel-related services worldwide. The company is primarily organized into two groups, the Global Consumer Group and the Global Business-to-Business Group.

American Express sells its products and services to various customer groups including consumers, small businesses, middle-market companies, large corporations and banking and financial institutions through various channels such as direct mail, online applications, sales forces and direct response advertising.

Considering a combination of factors, the company primarily operates through five reportable segments:

U.S. Card Services (USCS): This segment is aligned within the Global Consumer Group and issues a wide range of card products and services to consumers and small businesses in the U.S. Additionally, it provides consumer travel services to card-members and other consumers.

International Card Services (ICS): This segment is also aligned within the Global Consumer Group and issues proprietary consumer and small business cards outside the U.S.

Global Commercial Services (GCS): This segment is aligned within the Global Business-to-Business Group and offers global corporate payment as well as travel-related products and services to large and mid-sized companies.

Global Network & Merchant Services (GNMS): This segment is also aligned within the Global Business-to-Business Group. The segment operates a global general-purpose charge and credit card network, which includes both proprietary cards and cards issued under network partnership agreements. It also manages merchant services globally, which includes signing merchants to accept cards as well as processing and settling card transactions for them. Further, this segment offers merchants point-of-sale products, servicing and settlements and marketing programs.

Corporate & Other: This segment consists of corporate functions and supplementary businesses. The corporate functions include the company's publishing business, Travelers Checks and other prepaid products. The Enterprise Growth Group (EGG) program is also reported under this segment.

During the fourth quarter of 2008, American Express became a bank holding company under the Bank Holding Company Act of 1956. Since then, the Federal Reserve Board has been the company's primary regulator. As of Dec 31, 2013, American Express had 62,800 employees.

On Mar 26, 2014, the company's comprehensive capital plan (CCP) was approved by the Federal Reserve, which enables it to increase share repurchases and dividend payouts.


American Express Co. (AXP): Read the Full Research Report
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AMER EXPRESS CO (AXP): Free Stock Analysis Report

To read this article on Zacks.com click here.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: AXP , USCS

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

80%

Most Active by Volume

19,721,096
  • $15.37 ▼ 0.45%
17,764,114
  • $8.09 ▼ 12.45%
17,328,909
  • $66.14 ▲ 1.95%
12,727,108
  • $95.67 ▲ 0.67%
12,425,337
  • $16.32 ▼ 4.34%
12,287,622
  • $51.31 ▼ 0.97%
11,752,228
  • $26.26 ▲ 0.23%
8,484,510
  • $38.75 ▲ 2.40%
As of 7/11/2014, 11:00 AM