Shares of financial services giant American Express
That's because American Express' fortunes are a useful gauge of both business and consumer spending. Put simply, its earnings are closely watched. Consider the company's trading volume yesterday -- it was one of the most active stocks on the New York Stock Exchange on heavier-than-usual volume. (Perhaps not coincidentally, so was massive financial services company Citigroup
And American Express' release can't be seen as bad news for the big picture. Revenues rose 14% year over year in the second quarter, and net income was ahead 15%. Business was good across the board; management cited growing card use, travel sales, financial advisor business, and client asset levels. Travel sales were up 14%, nearly as much as expenses for the division, but scale helped drive the operation's net income up 16%.
Investors have generally stood behind American Express over the last 12 months. Still, the shares have bounced around a bit -- and just underperformed the S&P 500 -- amid a mutual fund scandal and perhaps some uncertainty that the company's consumer-oriented businesses weren't being supported by progress at those companies actually paying the consumers (thus creating credit risks).
You can see that same uncertainty among investors tracking, for instance, temporary staffing firms, IT spending, and even uniform makers, which leads me to believe that investors are taking a wait-and-see approach with American Express. Despite the many positive signs coming out of American Express, you can't overlook that its P/E (based in projected 2004 EPS) is slightly lower than it was nine months ago.
Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.
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