American Express (AXP) Gains Exclusive Card Deal For Hilton

In a small but definite victory, American Express Co. (NYSE:AXP) has won exclusive rights as a credit card issuer for Hilton Worldwide Holdings Inc. Till now, the business was shared with Citigroup Inc. (NYSE:C) , which backed out from the business after it did not find the terms of the deal with Hilton appealing.

Chief Executive Officer of American Express Ken Chenault said at an investor conference that the Hilton deal won’t have a material effect on earnings. American Express’ relationship with Hilton dates back to 1960 since when the hotel stated taking its cards.

American Express’ shares have gained 5.6% year to date, against the Zacks categorized Miscellaneous Services industry’s loss of 2%. Shares seemed to have gained from investors’ confidence in the company’s steady progress in growth and cost initiatives. Given its progress on the fundamentals, the stock should continue performing well in the quarters ahead.

Coming back, this victory has given American Express an edge over Citigroup, which took over American Express’ Costco Wholesale Corp (NASDAQ:COST).’s card business last year. The loss of Costco was a big blow to American Express since it accounted for around 20% of its worldwide loans and 8% of card spending. To make up for the lost business and revive its business portfolio, the company took initiatives to accelerate growth, including driving new card acquisitions across its global consumer and commercial portfolios, expanding merchant coverage and speeding up its lending growth initiatives.

The deal, effective Jan 1, 2018, will also help American Express to overcome the loss of its co brand deal with JetBlue Airways Corp. in 2015. There also lies uncertainty about the fate of the company’s co-brand deal with Starwood which was purchased by Marriott last year.

In a separate development, the company reaffirmed its 2017 earnings guidance of $5.60 to $5.80, announced earlier.

American Express carries a Zacks Rank #3 (Hold). Some better-ranked players in the space are Visa Inc. (NYSE:V) and Vantiv, Inc. (NYSE:V) .

Vantiv beat estimates in three of the last four reported quarters, with an average positive surprise of 3.5%.

Visa beat estimates in each of the last four reported quarters, with an average positive surprise of 7.24%.

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