American Express: Color on Quarter (91.71)
- RBC Capital Mkts raises their AXP tgt to $79 from $77. 2Q14 results included an array of one-time items masking core EPS. Big picture, we remain concerned about the company's competitive position given continued expense controls, along with DOJ lawsuit risk. Shares remain richly valued at 16.8x 2015E EPS relative to our mid-upper 20% core ROE outlook - we continue to see less upside for AXP shares vs card issuer peers.
- FBR Capital notes the quarter was marked by significant noise; excluding the net gain associated with the business travel joint venture transaction (JV transaction) and gain on sale of ICBC shares, they estimate operating EPS of $1.35 versus the consensus and FBR estimates of $1.39. Key takeaways: (1) global (FX adjusted) and U.S. billed business accelerated on a YOY basis to +9% in 2Q14 from +7% in 1Q14, but revenue (FX adjusted) increased 5%; (2) of the $626M gain ($0.39/share estimate) from the JV transaction, approximately $0.05 benefited EPS, as the company reinvested the majority of the gain; and (3) mgmt reiterated its intent to hold operating expense growth to less than 3% annually through 2015. AXP shares currently trade at 15x FY15 EPS estimate, and while they believe the co's attractive ROE warrants a premium valuation, they view the shares as fairly valued given our EPS growth outlook of ~ 12%.
- Oppenheimer notes AXP reported 2Q14 EPS of $1.43 vs. consensus and our $1.38 estimate. Results contained about $0.05 of net benefit from the previously announced Business Travel JV sale which we had not included, and thus we could say the "core" results were in line from a purely EPS perspective. It created some noise across the expense lines, but in their minds the more important takeaway in the quarter came from the improvement in fundamentals. Here, they saw billed business re-accelerate to +9% YoY vs. +7% in 1Q (in line with 3Q/4Q13) and loan growth pick up to +5% YoY vs. a trailing-4Q-average of ~3%. This underlying fundamental strength is what drives our estimates higher.
- AXP is up ~1% in the premarket.