Sometime shortly after American Express lost its Costco exclusivity, I mentioned that American Express had gotten cheap. It was making $5.70 in profits and trading in the $70s, and things tend to work out when you buy a company with brand recognition in an oligopolistic industry that pounds out strong profits year after year. The management team mentioned that earnings would take a year or two to recover from the Costco loss as earnings growth at the rest of the firm needed to catch up and get in shape for its new call of heavy lifting, and then management expected earnings per share growth in the 12% to 15% range thereafter.
Those expectations may be a bit on the lofty side, but probably fall within the ballpark of reasonable expectations. Somewhere in my reader mailbox, I got the question: “If American Express isn’t expected to grow profits for a year … Read the rest of this article!