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American Express: Financial Winner

The KBW Bank Index (I:BKX) on Friday rose 0.3% to 64.86, with all but six of the index components ending with gains.

American Express

Shares of American Express have returned 46% this year. The shares trade for 15.3 times the consensus 2014 earnings estimate of $5.41 a share, among analysts polled by Thomson Reuters.

The company on Oct. 16 reported third-quarter earnings of $1.354 billion, or $1.25 a share, compared to $1.405 billion, or $1.27 a share, during the second quarter and $1.250 billion, or $1.09 a share, during the third quarter of 2012.

American Express said U.S. Card Services revenue grew 6% year-over-year to $4.286 billion during the third quarter. Period-end loan balances were up 2% year-over-year to $63.0 billion as of Sept. 30.

With its focus on high-margin travel services and credit card lending, the company is known for generating very solid returns on equity. American Express reported a third-quarter return on average tangible common equity of 30.6%, increasing from 29.7% the previous quarter, but down from 33.5% a year earlier.

KBW analyst Sanjay Sakhrani rates American Express "outperform," with an $87 price target. In a client note on Oct. 16, the analyst wrote that "the company's results were solid despite the challenging economic backdrop and we like the fact that the company has a number of levers that it can exercise if conditions become more challenging. Also, should the economic backdrop become more positive, we believe there is decent upside potential to top-line growth as well as our EPS estimates."

AXP Chart AXP data by YCharts

Interested in more on American Express? See TheStreet Ratings' report card for this stock.


-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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