On May 21, 2013, shares of
American Express Co
), also known as AmEx, hit a 52-week high of $75.11. The company
reported first-quarter results with a positive earnings surprise
of 3.6%. AmEx delivered positive earnings surprise in all of the
last 4 quarters with an average beat of 4.1%.
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On Apr 18, AmEx reported its first-quarter 2013 operating
earnings per share of $1.15. The result comfortably surpassed the
Zacks Consensus Estimate of $1.11 and the year-ago quarter
earnings of $1.07 a share.
Results reflected improved global card spending, net interest
income and the loan portfolio. Further, delinquency rates and
yield exhibited stability, partially offset by lower lending
balances. Further, moderate top-line growth was supported by
strict expense control, which helped the overall increase in
bottom line, book value per share and effective capital
Subsequently, AmEx repurchased shares worth $802.5 million in the
first quarter of 2013 as it successfully attained the approval
from the Federal Reserve to buy back shares worth $3.2 billion in
2013. Another $1.0 billion worth of share repurchase can be
initiated in the first quarter of 2014.
We believe that improved credit trends, new business initiatives,
capital flexibility and stable ratings bode well for long-term
growth, which is reflected by the consistent dividend hike and
accelerated share buybacks.
The company returned 70% of its capital generated, in the first
quarter of 2013, to shareholders via share buybacks and dividend
payouts. On a cumulative basis, AmEx has distributed 66% of
capital generated through dividends and share buybacks since its
inception in Dec 1994. This injects ample confidence among the
Meanwhile, valuation looks reasonable for AmEx. The shares are
trading at 5.2% premium to the peer group average on a forward
price-to-earnings basis and 193.8% premium to the peer group
average on a price-to-book basis. Both return on equity and
return on assets are 306% and 154%, respectively, above the peer
group average. Nevertheless, the 1-year return from the stock is
35.6%, much above S&P 500's return of 28.9%. The overall
long-term expected earnings growth rate for this stock is 10.9%,
which is slightly below the peer group.
AmEx currently carries a Zacks Rank #3 (Hold). Among others in
SS&C TechnologiesHoldings Inc
) carry a favorable Zacks Rank #2 (Buy) and warrant