AMER. EXPRESS NYSE-AXP
TIMELINESS
SAFETY
TECHNICAL
3
1
3
High:
Low:
Lowered 8/7/15
57.1
47.3
RECENT
PRICE
59.5
46.6
62.5
49.7
65.9
50.4
10.0 RELATIVE
DIV’D
Median: NMF) P/E RATIO 0.56 YLD 2.3%
53.66 P/ERATIO 9.5(Trailing:
52.6
16.5
LEGENDS
14.0 x Earnings p sh
. . . . Relative Price Strength
Options: Yes
Shaded area indicates recession
Raised 8/14/15
Raised 1/15/16
BETA 1.00 (1.00 = Market)
42.3
9.7
49.2
36.6
53.8
41.3
61.4
47.4
90.8
58.3
96.2
78.4
93.9
67.6
VALUE
LINE
Target Price Range
2018 2019 2020
D
160
120
100
80
60
50
40
30
2018-20 PROJECTIONS
Ann’l Total
Price
Gain
Return
High
90 (+70%) 15%
Low
75 (+40%) 10%
Insider Decisions
to Buy
Options
to Sell
A
0
0
1
M
1
2
3
J
0
0
0
J
0
1
1
A
0
0
0
S
0
0
0
O
0
0
0
N
0
3
2
D
0
0
0
% TOT. RETURN 1/16
Institutional Decisions
1Q2015
2Q2015
3Q2015
661
544
504
to Buy
to Sell
613
612
623
Hld’s(000) 830397 818669 815148
Percent
shares
traded
18
12
6
1 yr.
3 yr.
5 yr.
THIS
STOCK
VL ARITH.*
INDEX
-32.7
-5.8
31.5
-10.4
20.6
40.9
20
15
On November 14, 2008, American Ex- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 © VALUE LINE PUB. LLC 18-20
press became a bank holding company un- 2.43 2.92 3.39 2.48 1.54 3.35 4.09 4.40
4.88
5.56
5.37
5.35 Earnings per sh A
6.00
der the BHC Act subject to the supervision
.48
.57
.63
.72
.72
.72
.72
.78
.86
.98
1.10
1.22 Div’ds Decl’d per sh B■
1.30
and examination by the Federal Reserve of 8.50 8.77 9.52 10.21 12.09 13.56 16.15 17.09 18.32 20.21 21.65 23.15 Book Value per sh
26.20
the United States. Thus, in order to better 1241.0 1199.0 1158.0 1160.0 1192.0 1197.0 1164.0 1105.0 1064.0 1023.0 969.00 940.00 Common Shs Outst’g C 900.00
represent American Express’ operations, we
21.9
18.7
17.4
15.3
17.5
12.4
11.6
12.7
15.0
16.2
14.5
Avg Ann’l P/E Ratio
14.0
have altered our financial presentation. D
1.17
1.01
.92
.92
1.17
.79
.73
.81
.84
.85
.74
Relative P/E Ratio
.90
.9%
1.0%
1.1%
1.9%
2.7%
1.7%
1.5%
113960
CAPITAL STRUCTURE as of 9/30/15
40801
ST Debt $3160 mill.
Due in 5 Yrs $40000 mill.
2440.0
LT Debt $48653 mill. LT Interest $1180 mill.
2758.0
(Total interest coverage ’14: 6.7x)
19985
(67% of Cap’l)
15614
No Defined Benefit Pension Plan
3062.0
Leases, Uncapitalized Annuals rentals $237 mill.
24.5%
2.69%
Pfd Stock Series B $750 mill. Div’d 5.2%
30781
Series C $850 mill. Div’d 4.9%
10549
Common Stock 984,245,923 shs.
9.3%
as of 10/23/15
35.8%
29.0%
MARKET CAP: $52.8 billion (Large Cap)
23.4%
FINANCIAL POSITION 2013
2014 9/30/15
19%
($MILL.)
128329
43116
2993.0
3026.0
22161
16989
3611.0
29.7%
2.81%
42747
10511
8.2%
33.6%
34.4%
28.1%
18%
149830
53436
3590.0
4341.0
24141
17824
4048.0
27.3%
2.70%
55285
11029
7.4%
35.7%
36.7%
30.2%
18%
126074
40659
3646.0
5798.0
24719
18986
2871.0
19.8%
2.28%
60041
11841
9.4%
32.3%
24.2%
17.2%
29%
124088
30010
3124.0
5313.0
21399
16369
2137.0
24.8%
1.72%
52338
14406
11.6%
24.2%
14.8%
8.4%
43%
147042
57616
4869.0
2207.0
22950
19648
4057.0
32.0%
2.76%
66416
16230
11.0%
39.2%
25.0%
19.7%
21%
153337
61166
4641.0
1112.0
25321
21894
4899.0
29.6%
3.20%
59570
18794
12.3%
39.9%
26.1%
21.5%
18%
Cash Assets
Invest. Sec’s
Receivables
Other
Total Assets
Deposits
Accounts Payable
Other
Total Liab.
19486 22288 19938
5016
4431
3947
47185 47000 46407
81688 85384 83924
153375 159103 154216
41763 44171 49301
10615 11300 11340
81501 82959 72240
133879 138430 132881
ANNUAL RATES Past
of change (per sh) 10 Yrs.
Loans
5.0%
Earnings
4.0%
Dividends
8.5%
Book Value
4.0%
Past Est’d ’12-’14
5 Yrs.
to ’18-’20
2.5%
2.0%
.5%
3.5%
13.0%
7.0%
-2.0%
6.0%
QUARTERLY REVENUES ($ mill.) A
Mar.31 Jun.30 Sep.30 Dec.31
2012 7614 7965 7862 8141
2013 7881 8245 8301 8547
2014 8199 8657 8329 9107
2015 7950 8284 8193 8391
2016 8050 8450 7900 8100
EARNINGS PER SHARE A
Calendar Mar.31 Jun.30 Sep.30 Dec.31
2012
1.07
1.15
1.09
1.09
2013
1.15
1.27
1.25
1.21
2014
1.33
1.43
1.40
1.39
2015
1.48
1.42
1.24
1.23
2016
1.30
1.90
1.10
1.05
QUARTERLY DIVIDENDS PAID B■
Calendar Mar.31 Jun.30 Sep.30 Dec.31
2012
.18
.20
.20
.20
2013
.20
.20
.23
.23
2014
.23
.23
.26
.26
2015
.26
.26
.29
.29
2016
.29
Calendar
Full
Year
31582
32974
34292
32818
32500
Full
Year
4.40
4.88
5.56
5.37
5.35
Full
Year
.78
.86
.98
1.10
1.4%
1.2%
1.1%
1.4%
Avg Ann’l Div’d Yield
1.5%
153140 153375 159103 161000 162000 Total Assets ($mill)
167000
64309 66585 70104 59000 62000 Loans ($mill)
70000
4628.0 5047.0 5472.0 5922.0
5500 Net Interest Inc ($mill)
6000
1990.0 2110.0 2044.0 1988.0
2000 Loan Loss Prov’n ($mill)
2100
26954 27927 28820 26896 26500 Noninterest Inc ($mill)
27800
22246 22976 23257 22892 22325 Noninterest Exp ($mill)
23500
5076.0 5359.0 5885.0 5163.0
5150 Net Profit ($mill)
5500
30.9% 32.1% 34.5% 35.0% 33.0% Income Tax Rate
33.0%
3.31% 3.49% 3.70% 3.20% 3.20% Return on Total Assets
3.30%
58973 55330 57955 48000 48000 Long-Term Debt ($mill)
45000
18886 19496 20673 21000 22000 Shr. Equity ($mill)
23600
12.3% 12.7% 13.0% 13.0% 13.5% Shr. Eq. to Total Assets 14.0%
42.0% 43.4% 44.1% 36.5% 38.0% Loans to Tot Assets
42.0%
26.9% 27.5% 28.5% 24.5% 23.5% Return on Shr. Equity
23.5%
22.1% 22.7% 23.4% 19.5% 18.0% Retained to Com Eq
18.0%
18%
18%
18%
20%
23% All Div’ds to Net Prof
22%
BUSINESS: American Express Company is a leading global payments, network, and travel firm established in 1850. Its business
segments are: Global Consumer Group and Global Business-toBusiness Group. Divested AMEX Life, 10/95; American Express
Bank, 2/08. Spun off Lehman Brothers to shareholders, 5/94; American Express Financial Advisors, 9/05. Had approximately 54,000
employees at 12/31/14. Officers and directors own approximately
1.0% of the company’s common stock; Berkshire Hathaway,
14.9%; Capital World Investors, 5.6%; BlackRock, 5.5% (3/15
Proxy). Chrmn. & CEO: Kenneth I. Chenault. Incorporated: New
York. Address: 200 Vesey Street, New York, New York 10285. Telephone: 212-640-2000. Internet: www.americanexpress.com.
Investor sentiment toward American
Express continues to sour. Since our
November report, the stock price has
declined 27%. For comparison, the Dow
has dropped 8% over the same period. This
has continued a trend for AXP, which has
been a market laggard over the past few
years. We attribute the bulk of the underperformance to news that the company
will lose transaction exclusivity with
Costco (effective March 31, 2016). At present, the warehouse chain accounts for a
material percentage of AMEX’s total
transactions. Fully offsetting this business
will be very difficult (discussed below).
The company’s near-term prospects
appear unexciting. Losing the Costco
contract will take a hefty bite out of total
transactions, revenues, and profits over
the quarters and years ahead. That said,
in the June interim, as part of the separation, Amex will register a one-time $1 billion sale of the Costco portfolio. That will
certainly help 2016 share net; our estimate is $5.35 a share, or $0.02 lower
than last year’s tally.
We think that Amex will recover over
the longer term, though the road may
be bumpy. It has already begun allocating greater funds and resources toward
marketing initiatives and technology in order to attract new card members. Management also mentioned that it will focus on
restructuring and streamlining operations,
and may consider acquisitions. However, a
game-changing purchase is probably not
on the horizon, due to the complicated and
costly nature of such deals. We agree with
management’s approach, though it will
probably lead to increased costs that will
further hamper profits. On that note, for
the 2018–2020 time frame, we have
trimmed our bottom-line projection by
$0.50, to $6.00 per share.
We think that this out-of-favor equity
should interest some buy-and-hold investors. The loss of Costco and management’s strategies will likely hurt Amex’s
near-term profitability. However, the company should be able to eventually get back
on track and return to healthy annual
profit gains. Due to the stock’s prolonged
underperformance, it now trades at a very
reasonable price-to-earnings ratio, and total return potential is worthwhile.
Ian Gendler
February 12, 2016
(A) Fully diluted earnings. May not sum to total (B) Div’d’s historically paid in mid-Feb, May, (C) In millions.
due to rounding. Next earnings report due mid- Aug., and Nov.■ Div’d reinv. plan available.
(D) Began reporting as a bank holding compaApril.
ny on 11/14/08.
© 2016 Value Line, Inc. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind.
THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for subscriber’s own, non-commercial, internal use. No part
of it may be reproduced, resold, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product.
Company’s Financial Strength
Stock’s Price Stability
Price Growth Persistence
Earnings Predictability
A++
80
70
60
To subscribe call 1-800-VALUELINE