Will the American Express Company (NYSE:AXP) Surprise Investors Once More?

October 16, 2017, 12:59 pm ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

The American Express Company (NYSE:AXP) is expected to announce its third quarter earnings result later this week. The company has exceeded analysts’ expectations in terms of its revenues and earnings per share in three of the last four quarters and it remains to be seen whether this shall be the case this time around.

Article Summary

The company’s results have beat expectations in recent quarters.

AXP has a history of issuing a stable dividend and buying back shares.

The company’s future growth lies in international markets and SME loans.

Here’s the trading report for AXP

In the last quarter, the company’s revenues came in at $8.3 billion, which was higher than the Zacks consensus estimate of $8.2 billion. The company’s third quarter results are expected to be quite strong as a reflection of the company’s current strategy of optimizing investments, increasing revenue growth, and reducing costs.

The company has recently created a tradition of returning a significant portion of its profits to shareholders and this trend is expected to continue into the third quarter. Investors in American Express should expect the company to continue issuing a stable dividend, while at the same time buying back some shares from its investors.

It is expected that the company will report an increase in net card fees due to the growing popularity of its platinum and delta card offering within its main US market as well as in Japan and Mexico.

The company faces stiff competition from Visa Inc (NYSE:V), MasterCard Inc (NYSE:MA) and Discover Financial Services (NYSE:DFS). The company lost its lucrative co-branding deal with Costco Wholesale Corporation (NASDAQ:COST) last year, which was awarded to Visa Inc. This was a major loss to the company given that Costco contributed about 20% of the company’s loans at the time.

American Express has strong fundamentals and its current business strategy of expanding into lucrative international markets, while at the same time focusing on servicing the financial needs of businesses seems to be working. The company has a strong footprint in the US, which contributes to most of its revenues and the company wants to focus on growing its US revenues by serving the small business sector.

The company is also focusing on international expansion, which is well on track as evidenced by the second quarter results, hence, the company’s future growth potential seems promising. The question remains whether the company is a good long-term investment at its current price and valuation.

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