This Catalyst Could Make American Express Company (AXP) Earnings Soar

American Express Company (NYSE:AXP) is scheduled to release its quarterly earnings report tomorrow, and with the stock trading near all-time highs, investors expect a lot from the company this quarter. Even though the venerable member of the Dow Jones Industrial Average (INDEXDJX:.DJI) has already recovered handsomely from the financial crisis, shareholders still want to see how American Express Company (NYSE:AXP)’ earnings can grow faster than they have in the past.

AmEx has taken steps to broaden its appeal by focusing on a different demographic that could boost its customer counts and introduce a whole new group of people to its products. But will those efforts work to produce greater profits or simply water down its premium brand? Let’s take an early look at what’s been happening with American Express Company (NYSE:AXP) over the past quarter and what we’re likely to see in its quarterly report.

Stats on American Express

Source: Yahoo! Finance.

How can American Express make earnings grow even faster?
Analysts have hung tough with their views on American Express Company (NYSE:AXP) earnings, keeping their June-quarter estimates steady but raising their full-year 2013 calls by $0.02 per share. The stock, meanwhile, has soared almost 19% since early April.

AmEx started off the quarter well, with its April report on first-quarter earnings presenting a mixed picture that nevertheless left shareholders satisfied. Although the company fell short of expected revenue estimates, it beat earnings estimates by $0.03 per share and announced both a 15% dividend hike and a $3.2 billion share buyback.

Yet the challenge AmEx has faced for a long time is how to keep distinguishing itself in an industry that’s increasingly dominated by leading payment-processors Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA). Both Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA) have essentially used their payment networks as toll roads, luring third-party issuing banks to market their cards to customers and profiting from transaction volume, and they’ve issued 10 to 20 times the number of cards that AmEx has. By contrast, AmEx has adopted a much more vertically integrated business model, wherein AmEx maintains a much deeper connection to its cardholders, taking on credit risk but also reaping the rewards when it makes smart decisions about extending credit.