Tag Archives: financial

American Express: It’s Still About Bottom Line Improvement [Seeking Alpha]

American Express Company (AXP), with the market cap of $71.41B, is the most profitable closed-loop credit card network in the U.S., providing credit and travel services to affluent customers. Although AXP missed the revenue estimates for Q1, AXP continues to improve its bottom line.

Q1, 2013 Earnings

For Q1, 2013, revenue increased nearly 4 percent to $7.88B from $7.61B a year ago, which missed the estimates of $8.03B. However, net income increased 2 percent to $1.28B or $1.15 per share, beating analysts’ estimates of $1.12 per share. EPS grew faster than net income due to share buybacks, which had reduced the outstanding shares by 5% year-over-year.

Performance

Despite one less day compared with Q1, 2012 (Leap Year), billed business came in at $224B, which grew 6% on a reported basis and 7% on an FX adjusted basis. Cards in force grew at 5% while proprietary cards grew at 2%. All segments performed consistently with Q4, 2012, except for Global Corporate Services, which had slower growth due to a slower T&E spending growth.

Increasing Provision for Losses

The total provision for losses increased 21%, whereas charge card provision increased 10%, primarily driven by higher receivables, which are 5% higher than a year ago. Card member loan provision increased 30% or $63M, reflecting a 4% increase in card member loans compared to last year. The net write-off rate remains stable and remains historically low.

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Demographics: 401k, Mega Banks’ New Gold [Seeking Alpha]

The world is aging, and the life expectancy is increasing. The number of older persons has tripled over the last 50 years and it will more than triple again over the next 50 years. More older people and longer life expectancy will lead to more demand for retirement savings. According to the article written by Stephen Miller, CEBS, the average 401(k) balance in plans administered in the U.S. by Fidelity Investments reached a record high of $77,300 at the end of 2012, up from $69,100 one year earlier-an increase of 12 percent. About two-thirds of the 2012 increase was attributable to market action, and one-third was due to participant contributions. Fidelity Investments is one of the largest plan service providers.

Another study conducted by research firm, LIMRA, indicated that Generation X workers (born 1965-1980) have contributed to their current employer’s defined contribution plan for nine years, accumulating nearly $70,000 (January, 2013). On the other hand, Generation Y workers (born 1980-2000) have contributed to their current employer’s defined contribution plan for four years, accumulating slightly less than $26,000. According to Cecilia Shiner, senior analyst, LIMRA Retirement Research, while there are a lot of attentions on the Baby Boomers (78 million), nearly 116 million Americans (aged 20-47) need help on how to plan and save for retirement. As quoted from Cecilia Shiner:

Most Gen X and Y Americans will have to rely solely on their savings to fund their retirement, yet few are taking full advantage of the retirement savings vehicles available to them.

The study further suggests that if financial literacy could be improved for these consumers, the likelihood of participating in their employers’ plans may rise.

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Bank Of America And New York Community Bancorp: Low Forward P/E, Upgraded, Long-Term Buy [Seeking Alpha]

Bank of America Corp. (BAC) and New York Community Bancorp Inc. (NYCB) have lower Forward P/E as compared to their peers and have been recently upgraded by analysts. Both stocks will be analyzed fundamentally and technically in this article. Investing strategies will also be presented.

Bank of America Corp.

BAC was up 2.85% and closed at $12.26 on March 7, 2013. BAC had an unusually high call volume of 410,497 (vs. the average call volume of 171,060) with a daily volume ratio of 2.40 on Thursday. BAC had been trading in the range of $6.72-$12.42 in the past 52 weeks. BAC has a market cap of $132.14B with a high beta of 2.38.

On March 7, 2013, Edward Jones upgraded BAC from hold to buy. Analysts currently have a mean target price of $12.40 and a median target price of $12.75 for BAC. Analysts, on average, are estimating an EPS of $0.23 with revenue of $23.34B for the current quarter ending in March, 2013. For 2013, analysts are projecting an EPS of $1.00 with revenue of $90.64B, which is 5% higher than 2012. Analysts are projecting 18.70% growth for the next 5 years (per annum), which is higher than the industry average estimate of 8.65%.

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Citigroup And Credit Suisse: 2 Financial Stocks With Most Upgrades In Past 3 Months [Seeking Alpha]

Citigroup (C) and Credit Suisse Group (CS) are two financial stocks that received the most upgrades in the past three months. In this article, both stocks will be analyzed fundamentally and technically. Investing strategies will also be reviewed.

Citigroup Inc.

Citigroup is a leading global bank operating in more than 160 countries and jurisdictions. C was up 2.25% and closed at $44.58 on March 6, 2013. C had been trading in the range of $24.61-$44.75 in the past 52 weeks. C has a market cap of $135.47B with a high beta of 2.61.

Citigroup had received six upgrades and one new coverage from several analysts in the past three months. On Jan 22, 2013, Evercore Partners initiated the new coverage on C with an equal weight rating and a price target of $43.00. On January 17, 2013, Intra-day CLSA’s Mike Mayo upgraded C from outperform to buy with a price target of $50.00 (from $46.00) following Q4 results. On January 4, 2013, Goldman Sachs added C to its conviction buy List with a price target of $49.00 (from $42.00). Goldman Sachs indicated that the shares are miss priced given its earnings power, especially considering further restructuring could result in an 11% ROTCE over time. On January 3, 2013, JMP Securities and Sterne Agee had both upgraded C to market perform and buy rating, respectively. On December 19, 2012, Morgan Stanley upgraded C from equal weight to overweight. Lastly, Meredith Whitney Advisory upgraded C from hold to buy, according to CNBC.

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Top Financial Stocks Reporting This Week With Trending EPS Estimates [Seeking Alpha]

The market had a nice start for the earnings season last week. Alcoa (AA) kick started the earnings season and reported a stronger than forecast result. Wells Fargo (WFC) was the first major financial institution to report last week. WFC’s fourth-quarter profit rose 24% and revenue exceeded expectations. However, the bank continued to suffer from low interest rates while the mortgage boom showed signs of fading as reported by Dow Jones Newswires. The following report will present six major financial stocks due for reporting for the week of January 14-18, including three with upward EPS estimate trends and three with downward EPS estimate trends.

Three Major Financial Stocks with Upward EPS Estimate Trends

Company Name (Ticker) Period Time EPS Estimate
Goldman Sachs Group, Inc. (GS) Q4, 2012 7:00AM EST January 16, 2013 $3.70
M&T Bank Corporation (MTB) Q4, 2012 8:10AM EST January 16, 2013 $2.18
BlackRock, Inc. (BLK) Q4, 2012 10:15 AM EST January 17, 2013 $3.70

Source: Earnings Whispers and Yahoo Finance

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Top Stock With Unusual Call Activity On The Last Day Of 2012: Barclays [Seeking Alpha]

Stocks ended the year with a strong rally, where S&P 500 had best final-day gain with 1.69% increase since ’74 on budget talks. At the time of writing, the budget deal already passed by the Senate. According to economists at JPMorgan Chase & Co (JPM) and Bank of America Corp (BAC),

“The elimination of a 2 percent payroll tax cut, coupled with higher income taxes on the wealthy, will help reduce growth in the first quarter to 1 percent, from 3.1 percent in 2012’s third quarter. The expansion will strengthen later in the year as the housing market continues to rebound as forecasted.”

All three major indices rallied with Nasdaq led the gain with 2% increase. S&P 500 followed with 1.69% surge while Dow Jones also managed to wrap up with 1.28% gain. DIA sliced through its 50-day MA and closed above it, so did SPY. QQQ managed to break through its 50-day MA and 200-day MA and closed above both. All sectors closed in green and the sector of basic materials led with 2.05% increase.

The market sentiment is driven by greed now with Fear & Greed Index at 70, increased from the previous close of 49. As reported by CBOE, the total put/call ratio for today was 1.02, and the index put/call ratio was 1.04. The equity put/call ratio was 0.62, and the CBOE volatility index (VIX) put/call ratio was 0.71. In the following, top stock had been identified through our daily options scanning process, with the scanning criteria where the daily call volume ratio was above 3.00 (3x of the average call volume) with a call volume above 5,000.

Name (Ticker) Call Volume Average Call Volume Daily Volume Ratio
Barclays PLC (BCS) 7,856 1,473 5.33

Source: Schaeffer’s Research

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