Credit: Shutterstock photoLeading global provider of charge and credit cards, American Express Co.AXP reaffirmed its earnings per share (EPS) outlook for 2015. The company expects full-year EPS to be "flat to down" from the 2014 level. Bottom line will most likely be affected by increased spending to replace the revenue loss from the Costco U.S. contract that will terminate in Mar 2016. Increased marketing aimed at attracting and retaining card members in the second half will also drain operating earnings.
Other factors likely to affect 2015 earnings are a stronger U.S. dollar and the negative impact of rising interest rates on charge card profitability.
Following this announcement, shares lost 1.44% to close trading at $75.95, on Sep 18.
Management also threw light on 2016 and 2017 earnings with hopes of returning to positive earnings per share growth in 2016 and being within its targeted range of 12-15% in 2017. Management also warned investors that earnings will fluctuate from quarter to quarter more than ever seen in the past. The company also expects billings growth in the coming quarter to be lower than what was reported in the second quarter.
Nevertheless, we believe that earnings will see accretion from the recent initiatives undertaken by the company such as the Plenti loyalty coalition program in the U.S., expansion of its OptBlue small merchant program in Latin America &Canada (signed over 700,000 new merchants year to date), and the launch of its AmEx Express Checkout online payment solution.
Moreover, American Express has a steady international business, which it is expanding. Management believes Japan, United Kingdom, Mexico, India and China are significant business opportunities, and would drive long-term earnings growth.
American Express carries a Zacks Rank #3 (Hold). Some better-ranked stocks in this space are Blackhawk Network Holdings, Inc. HAWK , Moneygram International Inc. MGI and StoneCastle Financial Corp. BANX . Each of these stocks carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
MONEYGRAM INTL (MGI): Free Stock Analysis Report
AMER EXPRESS CO (AXP): Free Stock Analysis Report
BLACKHAWK NETWK (HAWK): Free Stock Analysis Report
STONECASTLE FNL (BANX): Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
