AMERICAN EXPRESS 7/30/93 52-Wk-Rng FY/Q EPS93 EPS94 PE94 NxtQtr LyQtr American Expr 32.63 34-20 12/3 2.70 3.00 11.4 0.67 -0.45 Q1 Q2 Q3 Q4 XXX XXX XXX XXX 1994 3.00 1993 0.49A 0.83A 0.67 0.71 2.70 1992 0.51A 0.63A (0.45)A 0.15A 0.83 * Raise 1994 to $3.00 from $2.60 and raise this year's expectations to $2.70 from $2.40. * Second quarter earnings beat analysts' expectations by $0.21, and reported earnings of $0.83 vs. $0.63 advanced 34% and were the company's best ever. * Stock is now selling at 11.5 to 12 times 1994 estimate. 1.) Second quarter earnings of $0.83 were better across the board than expected. TRS earned $234 million vs. $124 million a year ago, a somewhat better earnings performance than we had expected on sharply lower loss provisioning and reduced operating expenses. Revenues as expected were down slightly on a continued reduced cardmember base and sharply lower merchant discount fees. Shearson-Lehman brokers earned $121.5 million, though only $95 million of this is attributed to the portion of the company (Lehman Brothers) which will remain with American Express following the previously announced sale of Shearson to Smith Barney. 2.) There is no doubt that the new management has had a beneficial impact on the company and its stock price. While recent quarters have been adversely impacted by special charges, asset quality issues, and rising uncertainty this quarter contained nothing extraordinarily unusual, though analysts caution against annualizing second quarter growth in assessing the company's earnings power going forward. First, $0.05 per share of the $0.83 reflects earnings of operations which will be sold. Secondly, TRS earnings are now benefiting from a decline in reserves as the company reduces its provision for losses while non-performers at Optima have charged off and declined significantly from extremely high levels. Thus TRS' strongest seasonal quarter are usually the second and third quarter IDS posted an extremely strong quarter with earnings gains at 23%.