NEW YORK (TheStreet) -- Shares of American Express (AXP) - Get Report closed lower by 2.34% to $73.34 on Monday, despite financial holding company Nomura analysts' argument that recent developments could result in a "favorable sentiment shift."
The company's small business and commercial cards remain strong components of the company, and American Express's approximately 50% share of small business billings as well as travel and expense partnerships with about 70% of Fortune 500 companies are sustainable, analyst Bill Carcache said, according to Barron's.
American Express CFO Jeff Campbell told Carcache he expects pressure on the company's discount rate to remain "modest" and does not foresee problems related to growth-driven reserve building, per Barron's.
Further, American Express sold $14 billion of Costco loans, which should result in "another strong" Comprehensive Capital Analysis and Review in 2016, according to Carcache, Barron's reports.
However, Carcache maintains a "neutral" rating on the stock, citing concerns about "negative earnings growth over the next couple quarters," Barron's notes.
Based in New York City, American Express's principal products and services are charge and credit payment card products, and travel-related services offered to consumers and businesses around the world.
Separately, TheStreet Ratings team rates AMERICAN EXPRESS CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate AMERICAN EXPRESS CO (AXP) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, reasonable valuation levels and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has increased to $2,175.00 million or 35.93% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 22.82%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.8%. Since the same quarter one year prior, revenues slightly dropped by 4.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- AMERICAN EXPRESS CO reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, AMERICAN EXPRESS CO increased its bottom line by earning $5.55 versus $4.88 in the prior year. For the next year, the market is expecting a contraction of 0.9% in earnings ($5.50 versus $5.55).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Consumer Finance industry and the overall market, AMERICAN EXPRESS CO's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- You can view the full analysis from the report here: AXP