Barclays Adjusts American Express' Model Downwards Following Costco Divorce

In a report published Friday, Barclays analyst Mark DeVries commented that Costco Wholesale Corporation (NASDAQ: COST) represented a "meaningful" proportion of American Express Company's (NYSE: AXP) business.

Following the separation of the two companies, the analyst was forced to change his American Express estimates downwards.

DeVries explained that in 2014, the Costco U.S. business accounted for roughly eight percent of American Express' total billed business while Costco loans comprised of approximately 20 percent of American Express' worldwide credit card loan book and 10 percent of worldwide card in force.

The analyst explained that American Express' management team said that its 2015 earnings per share will be flat to down year over years as the company will now increase its marketing spend to attract new customers to its other products to offset the lost business from Costco.

However, the analyst reduced his 2015 earnings per share estimate to $5.48 from a previous $6.03 and lowered his 2016 earnings per share estimate to $5.56 from $6.46.

DeVries stated that there could be "incremental" earnings upside to the figures if the Costco U.S. loan portfolio will be sold to the new issuer.

Shares of American Express remain Equal Weight rated with a price target lowered from $96 to $85.