AMERICAN EXPRESS CO. $55 - New York symbol AXP

AMERICAN EXPRESS CO. $55 (New York symbol AXP, Conservative Growth Portfolio, Finance sector; Shares outstanding: 969.0 million; Market cap: $53.3 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.1%; TSINetwork Rating: Average; www.americanexpress.com) is one of the world’s largest issuers of payment cards, with 117.8 million cards outstanding in over 130 countries. Amex issues two types of cards: charge cards, which have no preset spending limit and must be paid in full each month; and traditional credit cards, which let users carry a balance. The company is also a bank that accepts deposits and makes loans. It cuts its credit risk by mainly catering to clients with above-average incomes and good credit histories. Amex wrote off just 1.9% of its U.S. loans in 2015, up slightly from 1.8% in 2014. Its international write-off rate crept up to 2.2% from 2.1%. In 2015, Amex’s revenue fell 4.0%, to $32.8 billion from $34.2 billion in 2014. In the U.S., average spending per card rose 0.7%, but international spending fell 6.8%, mainly because the higher U.S. dollar cut the value of overseas transactions. If you adjust for currency rates and Amex’s 2014 sale of 50% of its travel division, which serves corporate clients, revenue rose 4% in 2015. Overall earnings fell 12.3%, to $5.2 billion from $5.9 billion. Earnings per share declined 9.2%, to $5.05 from $5.56, on fewer shares outstanding. Without unusual items, Amex earned $5.38 a share in 2015. In March 2016, Costco will drop Amex as the only credit card it accepts at its U.S. stores. In response, the company is forming new alliances with other retailers, including Wal-Mart’s warehouse chain, Sam’s Club. Amex now plans to sell its Costco loans and cut $1 billion from its annual costs in the next two years. These moves should increase its earnings to $5.55 a share in 2016, and the stock trades at just 9.9 times that figure. The $1.16 dividend yields 2.1%. American Express is a buy.