The top line from International Card Services decreased by 4%. However, the bottom line surged by 11

American Express ( AXP ) is one of the premium Payment Industry players. The company has tremendous potential to benefit from the secular shift in the Payments Industry. It also has the required financial muscle to expand charter bus tours inorganically into emerging markets. These are a few reasons that we have given American Express a buy rating.
charter bus tours American Express charter bus tours operates in the global Payments Industry and provides charter bus tours innovative payment, expense charter bus tours management and travel services to consumers and businesses in over 130 countries. The major products and services that the company provides are charge, credit card payment charter bus tours products, travel-related services, network services and other prepaid products, including Travelers Checks. charter bus tours The company generates annual revenues of $30b, and in an attempt to diversify its revenue sources, AXP has focused on fee-based services and online charter bus tours and mobile payments. The company uses various channels to sell its products, including online applications, direct mail and others. About 70% of the revenues charter bus tours for American Express come from card transactions execution fees, while only 6% accrue charter bus tours from its travel services.
The global Payment Industry has been, and continues to be, affected by secular shifts . A clear shift has been seen over the years towards electronic payments. According to a report, the global volume of non-cash payments has increased. The use of instruments, which assist non-cash payments, increased at a compound annual rate of 6.8% in 2001-2009. For non-cash payments, cards remain the most preferred payment instrument, with an average market share of more than 40% . Experts are viewing another shift in the Payment Industry, as more and more consumers prefer to pay using their mobiles. Estimates are that mobile charter bus tours payments, which were $4.6b in 2010, will increase to $15.3b by 2013. In this regard, American Express established the Enterprise Growth Group, which has been made responsible charter bus tours for generating alternate sources of revenues in online and mobile payments. The company is moving forward with the EMV (Europay, Mastercard and Visa), a chip-based technology, which will be introduced in the U.S. in the second half of the current year, and is expected to significantly boost revenues in the coming years.
Continued instability in debt stricken Europe could have adverse affects on the Payments Industry charter bus tours in general, charter bus tours and American Express in particular. charter bus tours Fears regarding liquidity and defaults charter bus tours of European banks would have a negative impact on consumer spending and corporate confidence. About 11% of the total billed business for American Express comes from Europe. Deterioration in the situation could spillover and impact charter bus tours the company's revenues.
Growth in future revenues would largely depend on penetrating the emerging, and mature, Asia-pacific markets, which have already demonstrated tremendous growth in non-cash payments, as also illustrated by the chart above. The company has made several partnerships, including charter bus tours the one with the Bank of China , to increase its inorganic expansion.
The company reported a strong performance over the past five years. It did not post a loss during the credit crisis, while its 5-year sales, earnings per share and dividend growth were 3%, 7% and 5%, respectively.
Driven by low consumer confidence and sluggish card spending, American Express missed analyst estimates moderately. Although the results missed analyst estimates, they showed a slight improvement over the last year. The company earned charter bus tours $1.34b in the second quarter, which was 75bps above what it earned the last year. Its top line advanced by 5% to reach $7.96b. charter bus tours The company relied on its affluent customers, higher other revenues, and higher charter bus tours net interest charter bus tours income to post this surge in the top line, even as retail sales cooled in the U.S.
A segment-wise charter bus tours analysis revealed that income from Global Commercial Services increased the most (approximately charter bus tours 24%), followed by revenue charter bus tours growth of 15% for Global Network Merchant Services charter bus tours and 11% for International Cards Services.
Revenues from U.S. Card Services increased charter bus tours by 7% to $4b, reflecting a rise in net interest income, charter bus tours largely due to a growth in cardmember loans and higher cardmember spending. Net income from the segment was up by 8% to $718mn.
The top line from International Card Services decreased by 4%. However, the bottom line surged by 11%, partially due to a 2% decrease in expenses. Expenses plunged due to lower promotion and reward costs and lower marketing costs.
Global Network Merchant Services, American Express' largest revenues generating segments, witnessed an earnings surge of 15% on revenues of $1.3b. Revenues increased by 7% from a year ago, reflecting higher earnings accruing from merchants.
The company has less financial distress, as its debt-to-equity ratio is 295%, which is below the industry standard of 355%. It has sufficient ability to service its interest payments, since its interest coverage ratio is 3.77x.
The stock offers a dividend yield of 1.42%, which is marginally below the prevailing 10-year treasury yield. During the first quarter, it paid $234mn in dividends. Besides this, the company has a share repurchase charter bus tours program, under which it repurchased $233mn worth of shares during the first quarter of the current year. Under the repurchase program, AXP aims to distribute $4b during 2012, of which it has already spent $2b . It also aims to spend another $1b by the end of next year's first quarter.
The stock is trading at a discount to most of its peers with regards to both its book value and earnings. It is trading at a P/E multiple of 13.2x, which is at a 55% and 51% discount when compared to Visa ( V ) and MasterCard ( MA ). With regards to its P/B multiple of 3.37x, the stock is trading at a discount of 6% and 60% when compared to Visa and MasterCard .
Team of investment professionals including former hedge fund manager, trader charter bus tours and analyst at top tier $10 billion hedge fund. Members include investment professionals who oversaw research and trading organization of 50+.