American Express (NYSE:AXP) has been getting more bearish treatment recently, as Durbin and other regulations threaten their earnings.
Canaccord says, "American Express reported consumer spending increased by 15% in Q4/10, pushing the credit card company’s revenue 13% higher over the previous year; however, shares dropped on an EPS miss and regulatory concerns. Recurring EPS came in at $0.88, short of the consensus $0.96, but ahead of Q4/09’s $0.60 per share. The company reported improvements in bad loans, with provisions for losses decreasing by 68% from the prior year, and delinquencies, seeing 2.1% of accounts being more than one month behind as opposed to 3.7% last year. Write-offs decreased to 4.4% from Q4 from 5.2% in Q3 and 7.5% in Q4/09. Concerns surrounding the 'Durbin amendment' also weighed heavy on investors’ minds. The amendment proposes that fees charged to retailers for debit transactions are reduced; and while American Express does not offer debit cards, there are concerns that merchants may direct customers to use their debit cards as opposed to their credit cards. Credit Suisse held their bearish stance on the company, reiterating that it believes American Express will experience pressure on its discount rate in the more adverse regulatory environment. The brokerage notes that the credit card company has the highest discount rate among the four major card networks, something which is likely to garner additional attention in the next 12-18 months as the 'Durbin amendment” comes into play.'
American Express closed Wednesday at $44.46, losing $0.34, or 0.76 percent.
No comments:
Post a Comment