Analysts React After American Express Rings Up Q4 EPS, Sales Miss

American Express Company AXP reported Thursday with a fourth-quarter top-and-bottom-line miss. The credit card issuer guided to a better-than-expected revenue growth outlook for 2019, mostly due to a "reasonably strong" consumer. Here's how the Street reacted to the print. 

The Analysts

• Wells Fargo's Donald Fandetti maintains an Outperform rating on American Express with an unchanged $115 price target.
• RBC Capital Markets' Jason Arnold maintains at Underperform, price target lifted from $91 to $95.
• Guggenheim Partners' Jeff Cantwell maintains at Neutral.
• Argus Research Company's Stephen Biggar maintains at Hold.

Wells Fargo Sees Q4 'Noise,' Says Guidance 'Is Fine'

American Express' Q4 report included "a lot of noise" in the form of foreign exchange and tax woes, Fandetti said in a note.

Proprietary billed business growth slowed from 12 percent in the third quarter to 10 percent — something that management attributed to difficult comps, but which could also be a function of global trade and other forms of volatility, the analyst said. 

Looking forward to 2019, AmEx's guidance "is fine," with an EPS guide of $7.85 to $8.35 falling in-line with Wells Fargo's $8.20 per share estimate and the consensus estimate of $8.15 per share, Fandetti said. AmEx also guided toward 8-10-percent revenue growth in 2019.

RBC: 'Less Exciting' Stock

AmEx's quarterly print is notable for a loan loss provision coming in "well above" estimates at $954 million versus $833 million in the same quarter a year ago, Arnold said in a note. Total expenses rose from $6.19 billion last year to $7.69 billion and are likely to remain elevated due to heightened competition, he said. 

Management's 2019 EPS guidance range of $7.85 to $8.35 at the midpoint came in above the Street's estimates, the analyst said. Yet the guide isn't compelling enough for the Street to become more constructive on the stock, which makes it "less exciting" at current levels of 12.6 times 2019 estimated EPS and 4.1 times book value, he said. 

Guggenheim: Challenging Year Ahead

AmEx faces a challenging 2019, as the macro climate looks weakened, Cantwell said in a note. The credit card issuer will find it difficult to match 2018's billed business growth, and this is reflected in Guggenheim's modest downward revisions to 2019 EPS estimates: from $8.16 to $8.08 this year and from $8.97 to $8.92 in 2020, the analyst said.

"Further, we expect credit quality to eventually inflect — though management appears to be highlighting this, this dynamic may also constrain AXP's EPS growth."

Argus: AmEx Acknowledges Competitive Environment

American Express is "keenly aware" of the heightened competitive landscape, especially among its lower-tiered cards, Biggar said in a note. The company faces growing competition from cards like Sapphire and others that offer similar reward benefits at similar costs, he said. Yet the company's market share within the high-end and premium card market is safe and can be maintained, in Argus' view. 

Price Action

American Express shares were down 0.41 percent at $99.08 at the time of publication Friday. 

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