Stifel Has 'Many Questions' About American Express

American Express Company AXP is expected to conduct an investor day on March 10 and Stifel shared its thoughts on the upcoming event saying that many questions were ahead of the investor day, but answers remain unclear. Analyst Christopher Brendler, who rates AXP Hold, expects a much better performance from AXP management at the annual meeting later this week after a string of disappointments and growing investor unrest since last year's lackluster investor day. Brendler said AXP is still a strong franchise with key competitive advantages and significant marketing resources and excess capital post-Costco that can reinvigorate growth. He noted that despite all its recent disappointments, AXP is still highly profitable and growing, albeit more slowly. "Unfortunately, we still don't see any easy answers and increasingly see M&A as the most effective solution to improve AXP's top-line outlook. With management most likely to again highlight organic growth opportunities, we are not optimistic AXP will be able to materially improve sentiment," Brendler wrote in a client note. Much of AXP's problem stems from the rise of debit and with the failure at Enterprise Growth, with the strategic importance of revitalizing the card franchise become paramount. While management is likely to highlight its significant organic growth opportunities, the analyst don't see any easy answers and continue to prefer M&A. "We continue to see a compelling fit with Alliance Data Systems Corporation ADS but now see this deal as less likely given increased market concerns about credit risk. We think the speculation about Paypal Holdings Inc PYPL makes strategic sense, but the numbers just don't work by our math as at current valuations, it would likely have to be an MOE," Brendler said. Accordingly, the analyst remains Hold rated as he continues to wait for better top-line visibility and cut his fiscal 2016 earnings estimate by 5 cents to $5.41 a share and revenue outlook to $32.9 billion from $33 billion. Wall Street, on average, expects earnings of $5.49 a share on revenue of $32.48 billion. Shares of AXP were currently trading at $59.28. They were trading between $50.27 and $83.54 during the past 52-weeks.