American Express
This report is an analysis of the American Express company.
Company Background
Founder, date incorporated -- "Established in 1850 in New York, American Express Company was among the first and most successful express delivery businesses to arise during the rapid westward expansion of the United States." (American Express)
Initial source of Capital -- "Although in its early years American Express was not itself a financial services company, its largest and most consistent clients were banks. Delivering the banks' typically small parcels -- stock certificates, notes, currency and other financial instruments -- was considerably more profitable than transporting larger freight. Soon the company would scale down its parcel and freight delivery business in favor of creating and selling its own financial products." (American Express)
Key innovations -- "In 1882, American Express launched the money order business, which proved an almost instant success. The company introduced the world's first traveler's cheque in 1891 and within ten years was selling more than $6 million in cheques annually. In the course of building the money order and travelers cheque businesses, the company established correspondent banking relationships with a number of European banks that accepted and encashed the products." (American Express)
b. Primary products or services -- American Express Company is mainly in the business of providing travel-related services, financial advisory services and international banking services throughout the world.
c. The companies geographic location is: American Express Co., World Financial Center, 200 Vesey Street, New York, NY10285 Phone [HIDDEN] Fax [HIDDEN] Email: ronald. -- Web Site: http://www.americanexpress.com/
d. Primary products -- "American Express has three operating segments: Travel Related Services (TRS), American Express Financial Advisors (AEFA) and American Express Bank (AEB). TRS' products and services include, among others, charge cards, cardmember lending products, travelers' checks, and corporate and consumer travel services. AEFA's services and products include financial planning and advice, investment advisory services and a variety of products, including insurance and annuities, investment certificates and mutual funds. AEB's products and services include providing private, financial institution and corporate banking; personal financial services, and global trading." (Yahoo Finance)
e. Primary customers -- "American Express is a world leader in providing charge and credit cards to consumers, small businesses and corporations. We also began to see a solid pick-up in spending by corporate cardmembers for the first time in several years. Moreover, the number of merchants who accept American Express cards continues to grow, and we saw a substantial increase in cardmember transactions at retailers, supermarkets, gas stations, drugstores and other everyday spending locations. Our lending business also performed very well. The benefit of rewards, along with competitive offers on revolving credit products, helped drive double-digit growth in lending balances on American Express credit cards." (American Express)
f. Percent of sales from international markets -- "In 2003, we added 3.5 million new cards, bringing total worldwide cards-in-force to 60.5 million. We were among the top card issuers in both spending and lending balance growth, and had industry-leading credit quality. Worldwide billed business -- or spending on American Express cards -- rose 13%, with especially strong growth in consumer and small business spending, both in the United States and internationally." (American Express)
g. Future strategy growth -- Strong growth in our card business, outstanding credit quality, the success of our ongoing reengineering efforts, and progress at American Express Financial Advisors all played a role in our 2003 performance. For the year, we delivered: Net income of $2.99 billion, up 12% from $2.67 billion in 2002. Diluted earnings per share of $2.30, up 14% from $2.01 last year. These results were at the high end of our long-term target of 12 to 15% earnings per share growth and surpassed our long-term targets of 8% revenue growth and 18 to 20% return on equity. We were particularly pleased with our revenue performance.
h. Risks to future strategy growth -- "Return on equity of 20.6%, compared with 20.2% a year ago & Revenues of $25.9 billion, up 9% from $23.8 billion last year. Continued weakness in corporate spending and the equity markets, the war in Iraq and the outbreak of SARS all made for a highly uncertain environment." (American Express)
C. Macro Economic Influences
a. Plot the % change in stock price 1984 -- 2003 (% change real GDP, % change CPI, % change S& P. 500)
(Yahoo Finance)
b. compute the correlation coefficient between the % in stock price
i. % change real GDP, % change CPI, % change S& P. 500
U.S. Consumer Price Index Forecast All Urban Consumers 1982-1984=100.
Nov
2004
Dec
2004
Jan
2005
Feb
2005
Mar
2005
Apr
2005
Value
Standard Deviation
3.4
3.6
3.9
4.1
4.3
4.6
Correlation Coefficient
0.95
0.95
0.95
0.95
0.95
0.95
(6-Month Forecasts)
U.S. Consumer Price Index History and Forecast.
(6-Month Forecasts)
Current Economic Indicators
Indicator
Value
Inflation %
3.19
GDP Growth %
3.89
Unemployment %
5.50
Gold $/oz
Oil $/bbl
43.55
Prime %
5.00
(6-Month Forecasts)
c. based on direct and strength of these correlations, if economy went into recession in the next 6 months
i. Would...
Said Mr. Harris: "We are always looking at new ways to reach our customers through innovative digital platforms." Mobile works well since "There is rapid growth in mobile devices supporting more and more of the everyday tasks that people want to perform." Another highly successful mobile application has been that of American Express' Android version of its free mobile app, which has had more than 1 million views since 2011.
Why Did American Express succeed in the U.S.A. And Internationally? It succeeded because the company established an outstanding reputation in its core businesses very early in its lifetime. It also took advantage of the competition during both World Wars to support its customers with financial assistance when they needed it. Its business decisions, all told, were solid. It divested itself of non-profitable segments when necessary, and put the emphasis always on
The biggest challenge however over the long-tern is the lack of acceptance of foreign cards by Chinese merchants. There are an estimated 20 million businesses in China, and of these, 414,000 accept credit cards, and of those, 150,000 accept foreign credit cards (Worthington, 2003). At the infrastructure level this fact illustrates how pervasive the sociological factors that limit debt continue to influence the Chinese culture specifically and the Asian
American Express Creating ROI in a New Environment American Express (Amex) is one of the world's largest financial services company in the world, as well as the largest provider of many travel services. The company has a long history of building value for consumers by offering many services that are often free to them. Most credit card companies charge the consumer an interest rate for the use of their services, however Amex
American Express is a global, diversified financial services company headquartered in New York. The company is over 150 years old, founded in 1850. It is best known for its credit card, charge card, and travelers check business, but has numerous ancillary operations that are profit centers. Analysis's rank American Express as the fourteenth most valuable brand in the world, estimating the worth of the brand at over $21 billion dollars
Since inception, the Amex Composite Index has shown an increase of 57.3%, as compared to the NASDAQ Composite's gain of 26.6%, the S&P 500's gain of 7.1%, and the NYSE composite's gain of 14.3% (American Stock Exchange). Values and volumes of stocks and options at the AMEX are significant. Closing values as of 10/11/2004 at 5:07 PM ET show significant activity. As of this date, the total volume was 44,288,030,
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