American Express: A Solid Investment Amid Market Turmoil

In a declining S&P 500, American Express is a standout. With low delinquency rates and a strong focus on cash flow, American Express may present a promising investment opportunity for professionals in the current market environment.

Date: 05-04-2025

AI Rating: 8

Market Context
The S&P 500 has experienced a notable decline of 6.7% since the year's start, largely due to fears of increasing tariffs, persistent inflation, and uncertainties surrounding interest rate adjustments. This tumultuous market landscape encourages caution, yet presents distinct investment opportunities.

Investment Potential of American Express
American Express (NYSE: AXP) continues to attract attention as a compelling investment due to several robust factors.

Earnings Per Share (EPS)
Between 2019 and 2024, American Express reported an impressive compound annual growth rate (CAGR) of 12% in EPS, with expectations for a further 13% growth from 2024 to 2027. This consistent growth trend in EPS is a significant indicator for investors as it suggests the company's potential for profitability is strong and likely to continue.

Revenue Growth
Alongside EPS growth, American Express achieved a 10% CAGR in revenue during the same period, with forecasts indicating an 8% CAGR going forward. Healthy revenue growth is essential for maintaining investor confidence and ensuring ongoing operations and expansion.

Free Cash Flow (FCF)
American Express generated $12.1 billion in free cash flow over the past year and allocated substantial portions to share buybacks ($5.9 billion) and dividends ($2 billion). A strong FCF position allows the company to return capital to shareholders while also positioning itself for future growth prospects.

Credit Risk and Interest Rate Exposure
Notably, only 0.8% of American Express’s consumer and small business loans were delinquent by over 30 days, highlighting a commendable credit risk profile. Furthermore, the company’s structure allows it to adapt to shifts in interest rates better than competitors, facilitating stability in various market conditions.

Buffett's Endorsement
Lastly, the unwavering support from Warren Buffett’s Berkshire Hathaway, which holds a significant stake in American Express, acts as a robust signal to other investors regarding the company's long-term value and reliability.

In summary, while the broader market faces challenges, American Express stands out for its strong fundamentals, particularly in EPS, revenue growth, and FCF, which together provide a solid case for professional investors looking for opportunities in this fluctuating landscape.

Stocks: AXP