American Express Company (NYSE:AXP) — This leading global payments and travel and expense services company has a long record of success in both high and low interest rate environments.
Revenues grew at an impressive 7% last year, excluding travel commissions. S&P Capital IQ predicts revenues will grow 2% in 2015 and 7% in 2016. Its analysts forecast earnings will increase 8% this year to $6 per share and 11% next year to $6.65.
Capital IQ maintained these estimates and its “buy” rating on AXP stock despite the announcement that American Express’ merchant acceptance agreement with Costco Wholesale Corporation (NASDAQ:COST) will end in March 2016. While this is a negative, its analysts applauded the company’s decision to walk away from a deal that “no longer makes economic sense.” They also maintained their 12-month price target of $96.
The Costco news led to a 6.4% sell-off in AXP stock on Feb. 12, which included a gap down from $85.32 to $81.53. But negative surprises often result in good buying opportunities, especially in a well-managed company like American Express.
After a high-volume selling climax, AXP stock reversed just above $77 and flashed a buy signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR).
MACD is curling up, another positive sign, and the open gap at $81.53 to $85.32 provides an excellent trading target. However, longer-term investors may want to take this opportunity to position themselves in AXP stock for a move to the top of the current trading range at $95, which is nearly 20% above current prices. The company pays an annual dividend of $1.04 for a 1.3% yield.
