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Why Shares of American Express Are Up Today

By Lou Whiteman - Jan 24, 2020 at 1:50PM

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The fourth quarter of 2019 was strong, and the company expects more of the same in 2020.

What happened

Shares of American Express Co. (AXP) traded up more than 5% on Friday morning, before giving some of that gain back in the afternoon, after the company reported better-than-expected fourth-quarter earnings and provided an optimistic outlook for 2020. The company has now grown revenue by at least 8% for 10 straight quarters and management believes AmEx is well positioned to continue to generate growth.

So what

American Express before markets opened Friday reported fourth-quarter earnings of $2.03 per share on revenue of $11.37 billion, ahead of expectations for $2.01 per share in earnings on sales of $11.36 billion. The earnings per share number was 17% above the fourth quarter 2018, and net revenue was up 9% year over year.

A person holding their credit card.

Image source: Getty Images.

Company CEO Stephen J. Squeri in a statement said that during 2019 American Express added 11.5 million new proprietary cards, with 70% of the new cards choosing fee-based products. That helped drive card fee revenue up 17%.

"These results demonstrate the success of our strategy to generate sustainable, profitable growth across the enterprise over the long term," Squeri said.

Now what

American Express said it expects to grow revenue by 8% to 10% in 2020, and for earnings to come in at between $8.85 and $9.25 per share. Wall Street had been expecting the company to make $8.98 per share in 2020. The company expects the credit environment to remain steady in 2020, with "modest" increases in loss rates offset by growing loan volume and fee revenue.

The company on its post-earnings call with analysts said that they believe the business is still in the early stages of growth, with expansion opportunities available from both existing and new customers.

Shares of American Express are up 35% over the past year, but if the company's outlook proves to be correct the stock still has room to run. American Express, like most bank stocks, is vulnerable to a potential recession, but as long as the U.S. consumer remains strong, this company can thrive.

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