Tags: American | Express | consumer | AXP

American Express Riding Uptick in Spending

By    |   Thursday, 09 February 2012 10:27 AM

Consumer finance powerhouse American Express (AXP) is riding an uptick in spending. Long favored by billionaire investor Warren Buffett, AmEx may even outpace rivals Visa (V) and Mastercard (MA) in 2012, say analysts, after lagging last year.

AmEx’s business is divided into two segments: global consumer and global business-to-business. On the consumer side, AmEx targets affluent, creditworthy customers. The AmEx strategy is to offer strong spending incentives, multiple cards and appealing loyalty programs.

For fourth quarter 2011, AmEx reported total sales of $7.7 billion, up 7 percent from $7.2 billion in 2010. Net income for the quarter was $1.01 per share, up 15 percent. Full-year sales were $29.9 billion, up 9 percent; earnings soared 23 percent to $4.12 per share versus $3.35 a year ago.

For 2012, the consensus earnings estimate steadily has risen to $4.22 per share. The 2012 Wall Street estimate, which also has risen, is $4.66 per share.

AmEx is also amping up growth by launching a no-fee prepaid card, upgrading its digital payment platform and forging new card-issuing partnerships.

Earnings growing

AmEx has a strong dividend track record. Currently yielding 1.4 percent, AmEx’s dividend has more than doubled during the past 10 years despite fluctuating earnings.

From 2007 to 2009, AmEx’s earnings plummeted 33 percent (compounded annually) before stabilizing in 2010.

S&P analysts have a strong buy rating on AmEx, citing its strong customer base and an improving U.S. economy. The price target is $62.

The company next reports on April 19.

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