What Led To A 13% Decline In American Express Company (NYSE:AXP)’s Shares?


According to a data by S&P Capital IQ, American Express (NYSE:AXP) delivered disappointing earnings results in the 4th quarter due to which the company’s shares declined 13% in January 2015. The credit and charge company reported revenue of $9.11 billion for the quarter. The quarterly revenue is 7% more than that of the previous year’s revenue during the same time.

The company’s total income increased 11% to $1.4 billion. The company’s adjusted profit per share saw a huge increase of 15% to $1.39 in 2013’ fourth quarter. All in all, the company’s results met the expectations of Wall Street. However, there are some other facets of AmEx’s report that the investors are concerned about.

One of the major concerns of the investors is the increase in the company’s expenses which include the U.S card services aspect. The expenses at the card services aspect of the company rose 11% to $3.1 billion. Total expenses in the international market increased 4%, and when adjusted for the purpose of foreign currency translation, the expenses showed an increase of 10%.

Moreover, American Express (NYSE:AXP) revealed its plan to cut down approximately 4,000 jobs in the year 2015. The reason behind this decision is the rapidly growing expenses of the company which is taking a toll on the company’s wallet. The company has seen a rough beginning in 2015 as far as its financial sector is concerned, and the rise in the expenses and a slower credit growth obviously became a source of displeasure for the investors of AmEx.

However, all has not yet been lost and American Express (NYSE:AXP) has the potential of getting out of the financial pitfall that the company is currently in. The company can act as a lender as well as a payment processor on its credit side, and in this way it can gather interest fees from both its card holders as well as merchants. When the economic environment is strong American Express (NYSE:AXM) has the ability of giving superior growth to its partners.

The 5% growth in the 3 quarter does qualify as a string financial scenario for the company. However, things depend on the currency in Europe as well as U.S. The currency exchange translation, although does not directly have an involvement in the business model of AmEx, it still has a negative impact on the company’s top and bottom lines.

Furthermore, the continuing debts that the company is facing in Europe can also pose problems in the way of the international growth of American Express (NYSE:AXM). The approximately 12 times higher earnings that American Express (NYSE:AXP) managed is something to be appreciated. The management of the company has an aim of gaining a growth rate of 8% which is also impressive and the determination of the company is very intriguing.

Although American Express (NYSE:AXM) will have to face its share of hurdles along the way and the road to betterment will not be smooth, however the chances for the company’s growth seem to be higher than its downfall.

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