American Express’ 2019 fourth-quarter earnings, announced late last month, beat Wall Street expectations.
With the company’s adjusted annual profit coming in 12% higher in 2019 than in 2018, that was good news for the company and for shareholders.
If you invested $1,000 in the financial institution 10 years ago, your investment would be worth more than $4,000 as of Feb. 18, for a total return of 301%, according to CNBC calculations. By comparison, in the same time frame, the S&P 500 had a total return of just over 275%. American Express’ current share price was slightly above $129 on Monday, down more than 4% in morning trading amid growing fears of the economic effects of coronavirus.
While American Express’ shares have done well over the years, past performance is no sign of future results.
CNBC: American Express’ stock as of February 2020.
How American Express got its start
American Express dates to 1850, when it started as a freight shipping company. The company began introducing financial products and services and by the 1950s, Amex launched its first consumer charge card.
In 1966, it put forth a corporate card program for businesses, and in 1991, created its first loyalty program, now called Membership Rewards. The program serves to incentivize users with benefits and encourage member loyalty.
Since then, American Express has continued to reiterate its financial offerings by introducing lines of debit and credit cards as well as banking services. Today, it’s one of the world’s largest financial corporations with more than 63 million cardholders.
American Express’ stock performance
Through the years, American Express stock gone up and down.
Like many financial institutions, the company saw its stock sink around the time of the 2008 recession. By February 2009, its share price landed at just over $11.
In February 2015, the market value of American Express fell by around $8 billion within 48 hours after it announced the loss of a lucrative contract with Costco, which was set to expire in March 2016. The contract termination had shareholders worried about how much revenue Amex would lose and how it would impact their investments.
In October 2017, it was also announced that Kenneth Chenault, chairman and CEO for 17 years, would step down in February 2018 as American Express struggled to find its place in a modern market.
Despite the problems, Amex stock returned 5.4% annually under Chenault’s tenure. That’s close to double the 2.6% annual return of the financial sector during that period.
The latest on American Express
American Express attributed its Q4 success to the “well-balanced mix” it’s been able to strike between spending and fee and lending revenues. The card issuer reported that nearly 70% of new card members in 2019 went for fee-based products, which helped to grow card fee revenue by 17% last year.
Millennials are also big fans of Amex. In January, CNBC’s Jim Cramer credited young people with helping the company reach its better-than-expected quarter. “Millennials are really signing up, 50% of the new cards. That business is great,” Cramer said during a “Mad Money” lightning round.
This month, Amex also announced a new reservation booking tool for Platinum and Centurion members. The feature will allow cardholders to browse, book and manage reservations all in one place using their mobile device. And eligible users can make multiple reservations per day at over 10,000 restaurants worldwide.
If you are considering getting into investing, experts, including Warren Buffett, often advise starting with index funds, which hold a basket of companies. Because index funds aren’t tied to the performance of a single business, they’re less risky than individual stocks, making them a safer choice for beginners.
Here’s a snapshot of how the markets look now.
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CBRE predicts record $50 billion investment for commercial real estate this year – Times Colonist
TORONTO — Canada could see a record-breaking $50-billion worth of investment in commercial real estate this year as economic tailwinds and immigration policies support the booming sector, according to a report by CBRE, but it says the strong economy is also creating challenges of affordability and supply.
The commercial real estate services firm said Tuesday that total investment would be about $5 billion higher than 2019 and about a billion dollars higher than the record set in 2018.
Growth comes even amid low vacancies in major markets as tech companies in particular continue to prize downtown locations. Other strong areas include investments in rental apartments as home affordability gets out of reach for many Canadians, and industrial growth driven by e-commerce demand for logistics centres.
“Canada has so many advantages, and so many underlying fundamentals that are positives over the long-term, that we certainly think that growth in the Canadian commercial real estate market is going to continue,” said CBRE Canada vice-chairman Paul Morassutti.
Those trends, along with strong population growth and stable banking and governance, would help steer the sector if a recession hits, said Morassutti.
“The wild card is a recession. My feeling is we’re very well positioned to weather a recession, and I think we’ll continue to flourish after that because of those attributes.”
Heightened interest in the market is also creating challenges, including rising rents and limited office and industrial space, while climate change is creating its own issues.
CBRE says prime office rents jumped 20.9 per cent in Vancouver between 2018 and 2019, 14.2 per cent in Montreal, and 10.1 per cent in Toronto, while national industrial rents rose by 12.3 per cent between the two years for the largest increase on record.
Rents still form a small portion of company budgets and don’t seem to be a major constraint on growth yet, said Morassutti. He noted that in the industrial sector, costs savings in transportation from better locations more than offset costs from higher rents.
Rental rates for apartments are also climbing in major centres as home ownership becomes more expensive, which has helped drive investment in the multifamily. The sector could see about $11.9 billion in investment this year, up from $8.3 billion in 2018, to see the most of any commercial sector, CBRE expects.
The upward trend in residential rental rates is however putting pressure on income inequality, said Morassutti.
“Partially because of that lack of home affordability, you have all these people becoming renters, so on the one hand that’s a good thing. On the other hand, it’s not great for society that our two major cities are becoming unaffordable, it’s not great for the income divide, which is already a large social issue.”
Along with affordability, CBRE says the lack of investment in transit infrastructure, and increasing pressures of climate change on the construction sector and land values are also structural issues of concern for the year ahead.
More immediately, the impacts of the coronavirus outbreak also loom as a big unknown, but could be short-lived if it is contained, said Richard Barkham, global chief economist at CBRE said in a statement.
“If the coronavirus outbreak is relatively contained sometime in March, impacts on the Canadian economy and most commercial real estate sectors will be noticeable in the near term but less substantive over the year.”
He noted that short-term impacts would largely hit the hotel and retail sectors. He said the global property market should be able to weather the effects of the virus as anticipated today, but that a clearer picture of the epidemic should materialize sometime in March.
This report by The Canadian Press was first published Feb. 25, 2020.
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