SOURCE: Five Star Equities
NEW YORK, NY--(Marketwire - Feb 8, 2013) - Credit card stocks have provided investors with strong gains in 2012 as the U.S. economy continued to show signs of improvement. The Federal Reserve recently reported that consumer borrowing rose to the highest level on record in December. Five Star Equities examines the outlook for companies in the Credit Services Industry and provides equity research on American Express Company (NYSE: AXP) and Discover Financial Services (NYSE: DFS).
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Consumer borrowing rose for the fifth consecutive month with a $14.6 billion gain in December. The increase was largely due to a sharp rise in in student and auto loans, which posted its largest gain since November 2001. Consumer confidence has trended upwards heading into the New Year as the Thomson Reuters/University of Michigan index of consumer sentiment unexpectedly increased to 73.8 in January. A median forecast of 62 economists had predicted the index to fall to 71.5, according to Bloomberg.
"As consumers are willing to take on additional debt, that's a good sign that economic growth is beginning to turn around," said Andrew Brodsky, an economist with Stone & McCarthy Research Associates. "The gains are definitely encouraging."
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American Express reported a 47 percent decrease in fourth quarter net income due largely to charges related to restructuring costs. "With higher fourth quarter revenues and cardmember spending, we ended 2012 in strong shape," said Kenneth I. Chenault, chairman and chief executive officer. "Against the backdrop of an uneven economy, we capitalized on opportunities and continued to stay ahead of the trends that are reshaping our industry." Shares of the company have gained nearly 20 percent in the past year.
Discover Financial Services is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. The company reported total loans, credit card loans and Discover card sales all increased 6 percent year-over-year in the fourth quarter. The company has increased their quarterly dividend 40 percent to $0.14 per share. Shares of Discover have gained roughly 40 percent in the past year.
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