Oppenheimer Does Not Like American Express

In a report published Friday, Oppenheimer analyst Ben Chittenden commented on American Express Company (NYSE: AXP) following its first quarter results in which the company reported better-than-expected earnings on a worse-than-expected revenue.

Chittenden noted that American Express reported an earnings per share of $1.48, exceeding his expectations of $1.35 and the consensus estimate of $1.36. The analyst added that when backing out the reserve release, he gets a core number that is closer to $1.42, but this still includes certain items that management highlighted as "non-recurring benefits."

The analyst said the $1.42 figure "pencils out" to an approximate 34 percent "core" ROTCE, which is down from 36 percent in the same quarter a year ago. The downtick may not seem important, but Chittenden argued that this is occurring at a time when the company is ramping up expenses to try and offset the loss of its contract with Costco Wholesale Corporation (NASDAQ: COST).

American Express highlighted that on a foreign exchange/business-travel adjusted basis, revenues were higher by 5 percent year-over-year. However, the analyst pointed out that total expenses were up 5 percent adjusting the same way and this is before the company's big marketing and reinvestment push in 2015.

Finally, Chittenden highlighted that the PPE/card continued to trend lower in the quarter and with increased expenses, this is unlikely to change. In additional, International was also lower in the quarter (obviously foreign exchange impacts here the most).

Shares of American Express traded at new 52-week lows on Friday at $76.53, but the analyst sees further downside being likely. Shares were reiterated with Underperform rating with an unchanged price target of $68.