KBW Reviews AmEx Q4 Earnings, Downgrades To Market Perform

• Shares of American Express Company (NYSE: AXP) have declined 27.3 percent over the past year, reaching a low of $62.64 on Thursday.
• Sanjay Sakhrani of Keefe, Bruyette & Woods has downgraded the rating on the company from Outperform to Market Perform, while lowering the price target from $95 to $67.
• Although the current stock valuation seems attractive and downside appears to be limited, Sakhrani believes that the road ahead for the company could be “bumpy” in the foreseeable future.

Analyst Sanjay Sakhrani explained that it was difficult to be constructive on the stock given the extended timeline for American Express to return to its EPS growth targets of 12-15 percent. There is also a need for “evidence of traction and execution on the substantial investments being made.”

Signs of traction and execution are especially needed, given management’s comments regarding revenue growth not having accelerated according to plan in the latter half of 2015, despite the increased investment initiatives.

“Ultimately, in the current volatile macro environment we believe there is better relative value elsewhere in our coverage universe where growth is a more prevalent part of the story today,” Sakhrani stated.

Following the 4Q15 results, the EPS estimates for 2016 and 2017 have been reduced from $5.65 to $5.48 and from $6.31 to $5.60, respectively, to reflect the company’s updated expense and revenue expectations.