American Express (AXP) continued its earnings descent, reporting lower fourth quarter and full-year earnings at the end of its fiscal year. For the fourth quarter, revenue was down 8% from the year-ago quarter to $8.4 billion. For the year, revenue was down 4% to $32.8 billion. Earnings also trended lower, with EPS down 12% from last year's fourth quarter at $1.23. For the year, EPS was $5.38, down from $5.56 in 2014.
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The intrinsic value of AXP
Descending revenue and earnings growth has been a trend for the company in recent quarters as the company's leadership and strategic direction has been questioned by investors. In 2015, U.S. Card Services revenue gained 6%, while all other business segments were lower. For the year, International Card Services was down 9%, Global Commercial Services was 32% lower and Global Network and Merchant Services was down 4%.
In the fourth quarter, ValueAct, a leading shareholder of the company and outspoken market activist, exited from its position in American Express. ValueAct has sold its 11 million shares of the company, which accounted for 1% of American Express' outstanding stock. While commonly outspoken and active in its investment position, ValueAct's quiet exit is most likely due to American Express' support from Warren Buffett, who holds 15% of the company's outstanding stock and strongly favors CEO Kenneth Chenault. As a longtime supporter of American Express, Buffett has openly stated that his proxy votes will support Chenault's management decisions primarily shielding him from activist shareholders.
Despite skepticism from investors on the company's strategy and lack of investment in the industry's evolving digital capabilities, American Express still reports a positive outlook for 2016 and 2017. According to management's most recent earnings comments, the firm expects 2016 EPS of $5.40 to $5.70, and EPS of $5.60 for 2017.
Following the firm's earnings release on Jan. 21, the stock was down 0.59% to close at $62.64. Year-to-date the stock is down 20.82%, while it has lost 34.54% over the past year.
Disclosure: I do not own any shares of American Express.
This article first appeared on GuruFocus.
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Warning! GuruFocus has detected 2 Warning Sign with WMT. Click here to check it out.
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The intrinsic value of AXP