Beat the estimates
American Express’s (AXP) operating performance has fallen steadily over the past year. Investors have been exiting from the stock and are losing confidence in the leadership of CEO Kenneth Chenault, as reflected in the company’s stock price fall of 27% over the past year.
However, the stock has recovered 12% in the past month on Chenault’s possible exit, which is expected to revive its operating performance. Chenault’s possible exit has fueled speculation that the company may be up for sale.
Berkshire Hathaway’s Warren Buffett is the biggest shareholder in American Express and is confident of the company’s long-term prospects. Buffett’s other holding Wells Fargo (WFC) is expected to be a front-runner in the acquisition of American Express.
American Express reported 4Q15 EPS (earnings per share) of $1.23, the company beat Wall Street analysts’ EPS estimates of $1.13. However, profits fell on a year-over-year basis due to changing industry dynamics and an increase in competition from a cost and branding perspective. American Express is expected to report earnings per share of $1.34 in the March quarter and $1.85 in the June quarter, reflecting improved performance on inking of new partnerships.
American Express posted 4Q15 net income of $899 million compared to $1.4 billion in 4Q14. The fourth quarter saw a $419 million pretax charge, which included impairment of goodwill and technology assets in addition to restructuring costs within the Enterprise Growth Group. The company’s total revenue net of interest expense fell by 8% to $8.4 billion compared to $9.1 billion in 4Q14.
World’s largest card issuer
With a network of high-spending cardmembers, American Express’s annual charge volume exceeded $1 trillion in 2015. In comparison, Visa’s (V) annual charge volume was $7.3 trillion, and Mastercard’s (MA) volume was $4.5 trillion in 2014.
American Express is the biggest player in the card market based on purchase volumes, followed by JPMorgan Chase (JPM). American Express and JPMorgan Chase together make up 1.7% of the iShares Core S&P 500 ETF (IVV).