American Express Company (NYSE:AXP) will report its fourth quarter earnings after the bell on Thursday, and during the week there’s been an array of research reports previewing it.

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On Tuesday, The Buckingham Research Group put together what they called, “Solid Balance Growth Continued in December; Credit Trends Stable.”

The firm maintained its “Buy” rating after the release of December’s credit and loan balance data for American Express Company (NYSE:AXP)’s U.S. consumer and its small business credit card business. Analysts have a $69 target price on the stock.

Here are some highlights:

  • American Express Company (NYSE:AXP) reported chargeoffs and delinquencies for its US Card Services (USCS) unit for December. It reported a managed Q4 chargeoff rate of 2% when it preannounced its Q4 results last week.
  • In December, managed chargeoffs and delinquencies in USCS rose slightly (dollars) from November, but both remain near all-time lows and neither looks likely to rise soon.
  •  Chargeoffs remain extremely low. USCS managed a chargeoff rate of 2.1% in December, up slightly from November’s 2.0% and a year ago’s 2.3%. Dollar chargeoffs increased from $89 million in November to about $96 million in December – still very low.
  • 30+ day USCS managed a delinquency rate unchanged at 1.2%. Although delinquent loans in dollars rose from about $640 million in November to $670 million in December, they remain well below $750 million reported a year ago and don’t seem likely to rise much other than as a result of seasonality.
  • Loan growth solid in Q4. USCS managed loans increased by $3.1 billion in Q4, with a $2.4 billion (4.5%) increase during the month of December. With 4.3% yr/yr growth of card lending balances, Amex continues to grow faster than the industry’s 1% growth rate.
  • Trust delinquency and chargeoff rates are lower. Trust 30+ day delinquency rate declined by 9bp to 1.27% (or $5 million lower to about $410 million) in December and reached new historic lows.
  • 31-60 day delinquency rate declined by 3bp to 0.38%, 61-90 day rate was unchanged at 0.28% while 90+days delinquency rate declined by 7bp to 0.61%.
  • Trust net chargeoff rate declined by 9bp to 2.08%, despite a 10bp decline in recoveries.
  • Payment rate at 30.82%, though 33bp are lower, it  remains still an industry high and an indication of low delinquencies and chargeoffs.

Valuation/Investment thesis

  • Analysts’ $69 price target implies a P/E ratio of about 14x estimated 2013 EPS, consistent with historical P/Es.
  • Amex’s card network, superior lending business, and its ability to achieve its long term goals (8%+ revenue growth, and 25% ROE growth, 12%-15% EPS growth) justify a higher valuation.
  • Analysts see the latest reengineering initiative to yield the anticipated expense savings and help support revenue and earnings growth.

In addition, this week JPMorgan Chase & Co. (NYSE:JPM) cut its American Express rating from “Neutral” to “Underweight.” The firm has a $60.00 price target for the stock.

Additional reports this week included the following:

  • Goldman Sachs Group, Inc. (NYSE:GS) downgraded American Express from a “Buy” rating to “Neutral” with a $65.00 price target. The move came from a valuation call.
  • Credit Suisse Group AG (NYSE:CS) reiterated its “Underperform” rating with a $59.00 price target, up from its previous $58.00.
  • Barclays PLC (LON:BARC) (NYSE:BCS) Capital  reiterated its “Overweight” rating with a $68.00 price target.