Model update for accounting changes
We are updating our American Express estimates to adjust for the implementation of ASC 606 revenue recognition accounting standards. The company recast 2016/17 financial statements in an 8-K filing released on 9 March 2018. Under the new accounting rules, FY17 revenue would have been ~10% higher as cashback rewards and certain partner payments will be recognised as expenses rather than contra revenue items going forward. The changes have negligible impact on earnings and our EPS estimates are broadly unchanged. We remain Neutral with a $104 price target, which represents ~13x our FY19E EPS estimate of $7.71.American Express is a payments company. The company is engaged in providing credit and charge cards to consumers, small businesses, mid-sized companies and corporations. The company's reportable operating segments are: Global Consumer Services Group, which provides services to consumers, including travel and lifestyle services; Global Commercial Services, which provides payment and expense management services, as weel as commercial financing products; and Global Merchant and Network Services, which operates a global payments network that processes and settles card transactions, acquires merchants and provides multi-channel marketing programs and capabilities, and services and data analytics.
Formed in 2003 by an established team from Cazenove, one of the most respected investment banks in the UK, Atlantic Equities conducts and publishes fundamental, bottom up research on mid and large cap US companies.
Atlantic provide order execution through a wide range of DMA products and algorithmic trading suites.
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