Why American Express (AXP) Was Upgraded

NEW YORK (TheStreet) --Morgan Stanley has upgraded American Express (AXP) to "overweight" from "equal weight."

American Express gained 2.2% to $88.89 Monday.

The bank set a $100 price target for American Express, up from the previous $90 price target.

"We believe Amex can win over small merchants with its OptBlue program, boosting US acceptance closer to V/MA. Look for 7%/14% rev/EPS CAGR through 2016 as Amex takes share," the analysts wrote.

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Separately, TheStreet Ratings team rates AMERICAN EXPRESS CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMERICAN EXPRESS CO (AXP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, impressive record of earnings per share growth, compelling growth in net income and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • AXP's revenue growth has slightly outpaced the industry average of 3.2%. Since the same quarter one year prior, revenues slightly increased by 3.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • AMERICAN EXPRESS CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, AMERICAN EXPRESS CO increased its bottom line by earning $4.88 versus $3.87 in the prior year. This year, the market expects an improvement in earnings ($5.47 versus $4.88).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Consumer Finance industry. The net income increased by 105.3% when compared to the same quarter one year prior, rising from $637.00 million to $1,308.00 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength 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.
  • Powered by its strong earnings growth of 116.07% and other important driving factors, this stock has surged by 41.49% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • You can view the full analysis from the report here: AXP Ratings Report

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