American Express (AXP): ‘Break On Through’

Posted on Jul 23 2015 - 11:54am by Sharpe Trade

For years, I have stated that new investors should tune into companies quarterly conference calls, presented to shareholders. The benefits are numerous and many.

It only generally takes one hour or so, every three months.

News items that hit the market do not catch you as much by surprise, leaving you to wonder “Why did this happen?

One can become familiar with the business with which one is invested.

One can listen to the board members of various corporations around the planet, as they attempt to manage businesses worth billions of dollars. You’re not listening to some doofus and his thoughts on the economy who has no stake in issues facing the economy. You’re not even listening to my thoughts on the economy. You are listening to board members discuss the very real issues they face as they manage corporations worth billions.

When I listen to the conference call of a company, I take some notes. And therefore … I thought that to help out new folks as they navigate conference calls, I would start posting my notes, as I’ve taken them. Perhaps, we can make this a continual feature here at Sharpe Trade with the stocks that we have mentioned in the Sharpe Income project.

I have a number of calls to get through this week, however, the most recent earnings release and conference call was American Express (AXP), that you can find here.

American Express (AXP) – Daily Chart

American Express AXP Earnings Chart

So what’s the latest for this quarter’s earnings?

A few notes from my desk as I listened to the conference call

American Express AXP Quarterly Conference Call

Like IBM, American Express (AXP) is a company undergoing a number of challenges.  Though their long-term goals are always an 8% EPS growth rate, they are below this goal.  In actuality, their guidance into the future is for either flat EPS, or modestly lower EPS.  Like many corporations the stronger U.S. dollar is hurting them.  Unlike most credit card companies, an expected rise in interest rates will not benefit their business.  They have experienced core partnership changes.  At the same time, they are increasing their growth initiatives.  That costs money.

There has been a lot of buzz about American Express and COSTCO.  The company stressed a number of times, that with COSTCO in Canada, there is no portfolio sale, and that the situation with COSTCO in the U.S. is much different.  At worst case, the company stressed that it was a small piece of the pie, as to other venues of their business where they are looking to grow.

Actually, given the headwinds, I’m surprised at how well their business did, as reflected in my notes above.  Technically, I’m expecting lower prices.

If I was forced to put this quarter into a few sentences in addition the above notes?

I personally feel American Express (AXP) is negotiating their challenges well, which is why I am invested with them as an income piece.  Because on my time-frame, I want to be buying when a company like American Express (AXP) when it is challenged and trading at a discount.  Not when it is soaring high …

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