Zacks_Analysts' Blog : AmEx Initiates First Payment SDK - Analyst Blog

Yesterday, American Express Co. (AXP) (AmEx) announced the commencement of Payment Software Development Kits (SDKs), which provides a complete next generation digital range of authorization and submission solutions. Payment SDKs also makes AmEx the first payment network in the industry to enhance its global processing services.

Accordingly, Payment SDKs’ digital operating system will enable AmEx to better reach out to its merchants, third-party processors, gateways and point-of-sale manufacturers across the globe. Through this best-in-class tool, AmEx will be able to boost its operating competence by significantly reducing development times and enhancing its certification efficiencies for its direct connectivity partners.

With the help of Payment SDKs, these development and certification methods can now be achieved within days, which earlier used to take months. Additionally, Payment SDK is also expected to easily make available AmEx’s basket of value-added software solutions, which include SafeKey and Enhanced Authorization, thereby enhancing the developer’s experience on the company’s processing platform.

Payment SDKs will not only reduce the complexity in certification projects but also speed up the digital payments revolution for AmEx’s merchants and cardmembers. This implies that the company is better preparing itself to develop a strong position in the card payment processing industry, particularly now when more and more of the global populations are making a radical shift toward electronic card payment systems from paper transactions such as cash or cheques.

Hence, the new Payment SDKs will drive AmEx’s efficiencies as digital partners, thereby closely connecting its merchants with a high-speed payment solution, thereby complying with the next generation needs.

Overall, we believe these efforts are not only helping AmEx improve its operating leverage and reduce time-gap to reach out to its merchants but are also crucial for maintaining its competitive strength against arch rivals, such as MasterCard Inc. (MA), Visa Inc. (V) and Discover Financial Services (DFS), in the card industry.

Earnings Review

AmEx reported its third-quarter 2011 operating earnings of $1.03 per share, comfortably ahead of the Zacks Consensus Estimate of 96 cents and 90 cents recorded in the year-ago quarter. Meanwhile, net income from operations increased 13% year over year to $1.24 billion from $1.09 billion in the year-ago period.

Besides, the Zacks Consensus Estimate for the fourth quarter of 2011 is currently pegged at 98 cents per share, up about 4% over the prior-year quarter. In the last 30 days, a one out of 16 analyst firms has reduced its estimates for the upcoming quarter, while no upward revisions were witnessed. Meanwhile, for 2011, earnings are expected to escalate about 19% year over year to $4.04 per share.

Currently, the shares of AmEx carry a Zacks #3 Rank, implying a short-term Hold and long-term ‘Neutral’ stance.