American Express (AXP) Stock Lower After Disappointing 2016 Guidance

Shares of American Express Company (AXP) were down -3.15 or -5.03 percent to $59.49 per share in this morning’s premarket despite the company reporting better than expected earnings and guidance yesterday after the market close. American Express stock closed at $62.64, down -0.39 or -0.62 percent in Thursday’s regular trading session.

New York City based American Express Company, also known as Amex, is one of the world’s largest credit card and traveler’s check companies.
The company was founded in 1850 as an express mail company in Buffalo, New York by John Warren Butterfield, William G. Fargo and Henry Wells, two years before the founding of Wells Fargo & Co. (WFC), which was started when Butterfield and other American Express directors refused to extend the company’s operations to California.

The company currently accounts for roughly a quarter of the total dollar volume of credit card transactions in the United States and its stock is a component of the Dow Jones Industrial Average. American Express employs 54,000 people with operations around the world.

For the company’s 2015 fourth quarter ended on December 31st, 2015, American Express reported net income of $873 million or $0.89 per share. After adjusting for restructuring and impairment charges, earnings per share came to $1.23 for the quarter. This compares to $1.44 billion or $1.39 per share in the same period one year ago. Analysts expected the company to report earnings per share of $1.13.

Revenue of $8.4 billion was down -8 percent year on year, with the adjustment of effects from currency translation, revenues were up +4 percent year on year. Expenses increased +1 percent to $6.4 million, with the exclusion of foreign exchange, expenses were up +4 percent.

Kenneth I. Chenault, Chairman and Chief Executive Officer of American Express said in the press release that, “Our 2015 results and outlook reflect the reset in co-brand economics, pressures on merchant fees, the evolving regulatory environment and intense competition that have been re-shaping the payments industry. A number of cyclical factors in the broader economy have also weighed on our performance and influenced our outlook. Against that backdrop, and the fact that revenue growth has not accelerated as we anticipated, we are moving aggressively to streamline the company and drive efficiencies in order to take out $1 billion from our overall cost base by the end of 2017.”

Chenault continued, “We now expect 2016 EPS between $5.40 and $5.70. This reflects a substantial benefit from the planned sale of the Costco co-brand portfolio, offset in part by a continuation of elevated spending on growth opportunities as well as the loss of a partial year of Costco-related earnings. The portfolio transaction is expected to occur mid-year.” Analysts were expecting full year 2016 earnings of $5.41.

According to some analysts, the billion dollar proceeds from the sale of the Costco co-branded portfolio implies that underlying growth in the company will be weaker than expected, not stronger during 2016. The company forecast earnings per share of $5.60 for 2017, which includes the company’s plan to squeeze $1 billion from its cost base by the end of 2017.

Traders and investors have expressed their opinion selling the stock off in yesterday’s aftermarket and again this morning. With this morning’s selloff, American Express stock is down roughly -30 percent over the last twelve months and could continue sliding.

Other News About AXP

AmEx Chief Dismantles His Laboratory Serving Not-So-Wealthy

Company is dismantling its enterprise growth division.

Value Trap Alert: American Express

According to this analyst, American Express stock will lag the S&P for an extended period.
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Published on Jan 22, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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