AmEx Extends Drop as Costco Loss Prompts Analysts to Cut Targets

American Express Inc. fell in New York as JPMorgan Chase & Co. and others lowered their target price for the stock after the card issuer ended its agreement with Costco Wholesale Corp.

AmEx slid 2.8 percent to $78.26 at 9:44 a.m., the worst performer in the Dow Jones Industrial Average for a second straight day. The lender fell 6.4 percent on Thursday after saying it will terminate its exclusive credit-card and merchant agreement with Costco in the U.S. next year as the companies failed to renew their 16-year partnership.

JPMorgan analysts led by Richard Shane lowered their December 2015 target price for New York-based AmEx to $85 from $90, while Sanford C. Bernstein & Co. reduced its target to $90 from $97. Bank of America Corp. downgraded the stock to underperform from buy.

“The impact of the Costco U.S. loss will be significantly greater than we had estimated,” Kevin St. Pierre, a Bernstein analyst, said in a note.

Earnings-per-share growth in 2015 will be flat or down modestly compared with last year, AmEx Chief Financial Officer Jeff Campbell said Thursday. Quarterly results will be uneven as marketing expenses increase, while earnings per share should return to a 12 percent to 15 percent growth rate in 2017, he said.

JPMorgan lowered its 2015 earning-per-share estimate for AmEx by 9 percent to $5.52 and next year’s by 13 percent to $5.67. Bernstein dropped its estimate to $5.46 for this year and to $5.75 for 2016.

The U.S. Costco business accounts for about 20 percent of AmEx’s loans and 10 percent of its cards. The lender, whose deal with Costco in Canada ended last year, is under pressure as competition among banks and payment networks for co-brand agreements intensifies and as merchants seek better terms.

American Express is the only credit card accepted at Costco’s U.S. stores. The Issaquah, Washington-based retailer hasn’t disclosed a replacement.

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