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Topic: Growth Stocks

AMERICAN EXPRESS CO. $50 – New York symbol AXP

AMERICAN EXPRESS CO. $50 (New York symbol AXP, Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $60.0 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.4%; TSINetwork Rating: Average; www.americanexpress.com) gets most of its revenue from the fees it charges merchants when consumers use its credit and charge cards. It also provides travel-agency services.

The company’s cardholders have above-average credit scores and income. As a result, most of them pay their bills on time. The improving economy is also pushing up its travel-related fees.

In the three months ended March 31, 2011, American Express earned $1.2 billion, or $0.97 a share. That’s up 33.0% from $885 million, or $0.73 a share, a year earlier. The company continues to set aside less money to cover bad loans: its loan-loss provisions fell 89.7%, to $97 million from $943 million.

Revenue rose 7.2% in the quarter, to $7.0 billion from $6.6 billion. That’s mainly because spending by the company’s cardholders rose 17% as the economy improved. However, lower interest rates have dampened income from its investment portfolio.

The stock trades at just 13.0 times the $3.85 a share that American Express is likely to earn in 2011. However, the company plans to increase spending on rewards programs and other customer incentives. That could slow its earnings growth.

American Express is a hold.

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