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Strong Results From Undervalued American Express

Despite headwinds, the wide-moat firm is continuing to grow thanks to a strong economy.

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Jim Sinegal: American Express reported strong results this quarter with double-digit growth in billed business, double-digit growth in loans, and double-digit growth in revenue. At the same time, the tax cuts helped them out, and an extensive program of capital return over the last year helped them generate earnings per share growth of 38% over the course of the year.

American Express is still facing some headwinds. Their partners, hotels, and airlines are demanding more in payments for their co-brand relationships. Merchants are demanding lower prices, and rewards competition is still fairly intense. However, the strong economy is helping them to grow despite all of that. Consumers are spending. Unemployment is low, and loan-loss rates are very low, and consumers are once again willing to borrow. We also like that American Express is refocusing on its strengths.

Jim Sinegal does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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