American Express Earnings Preview: First Quarter 2009

American Express [[AXP]] is scheduled to report their first quarter 2009 results after the market closes on Thursday, April 23. Based on our analysis, we at are expecting AXP to report disappointing results that fail to meet Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $6.30 billion and EPS of $.08. This would represent a 12% decline in revenues from last year’s $7.19 billion in the same period. The current analyst consensus estimates calls for revenues of $6.46 billion and $.13 EPS.


There remains a great deal of uncertainty in regards to American Express’s first quarter results and analysts have become increasingly pessimistic as they revise downward their first quarter expectations. Meanwhile, JP Morgan [[JPM]], Citigroup [[C]] and Bank of America [[BAC]] have posted better than expected first quarter results. We view this as a positive for AXP, but remain concerned about increasing credit losses and declining consumer spending.


Kenneth I. Chenault, chairman and chief executive officer stated in last quarter’s earnings release, “we remain cautious about the economic outlook through 2009, and expect cardmember spending to remain soft with past-due loans and write-offs rising from current levels.”


Share Performance

American Express’s shares are up over 8% since the beginning of the year – making AXP one of only six Dow component stocks to post gains in 2009. Last year, American Express shares fell over 64% as the stock badly underperformed the 34% drop in the Dow Jones index.



Shares are now trading at 19x consensus 2010 EPS estimates. This is a premium to the relative valuations of their peer group. We view American Express as a risky holding in this current environment. Their premium valuation and potential negative catalysts are likely to lead to a pullback in AXP’s share price.


Recommendation: Sell with a $15 price target.


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