480px-American_Express_card_logo1-300x300Event: American Express (AXP) is expected to report earnings for the quarter ending Sept. 30, 2012 on Wednesday after the market closes. Wall Street is looking for American Express to report profit of $1.08 per share in the period. That estimate is 2 cents per share higher than 90 days prior. The company has exceeded estimates in each of the last four quarters. Shares of American Express are up 26% in the last year of trading. Analysts expect it to grow profits by 8% from the current year to the next. At current prices, shares trade for 13 times current year estimated earnings.

Analysis: It seems as though estimates for American Express are too low given the surprising strength and resilience of the consumer. Spending is holding strong and showing positive growth. That can only bode well for credit card companies like American Express. Recently it announced a deal with Wal-Mart Stores (WMT) to provide Wal-Mart customers with pre-paid debit cards. Sounds like a good strategy to me. I would expect profit growth at American Express to exceed double digits in the next year or two. If it can deliver such growth, its current valuation is too low.

Action: Look for the company to beat expectations and estimates to glide upward.

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