International Efforts Begin To Bear Fruit For American Express

Ben Chittenden of Oppenheimer commented in a report that American Express Company AXP's first quarter earnings release reinforces the bullish case for owning the stock.

Chittenden maintained an Outperform rating on American Express with a $93 price target. The analyst believes the company's U.S. business is demonstrating "good stable growth" but perhaps more important, the international growth story is showing signs of success.

Overall, competition within the higher-end credit card market continues to pick up, but the analyst thinks American Express is "managing through" it and this is the major take-away from the earnings report.

Shifting From Defense To Offense

Chittenden pointed out that American Express' adjusted Billed Business (BB) growth accelerated "pretty much across the board" and led to an adjusted revenue growth of 7 percent year-over-year.

In fact, the company posted an adjusted expense growth of just 1 percent on a year-over-year basis, which implies the company is beginning to "get its stride back" and in-line with a promise during its March investor day to shift from "defensive to offensive."

Looking forward, the analyst believes further acceleration in BB coupled with revenue growth acceleration in the underlying Non-T&E business (still a drag but showing sequential improvements) could lead to multiple expansion in the stock and earnings per share revisions higher.

Bottom line, American Express' management didn't boost its 2017 guidance despite a better-than-expected first quarter report but the analyst now sees the outlook as conservative. As such, investors could see benefit from earnings upside and multiple expansions moving forward.

See Also:

JJ Kinahan Sees Consumer Confidence For Credit Card Companies

American Express Shares On The Rise Following Strong Q1 Print