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What Should Investors Do With AmEx Now?

Andrew Harrer | Bloomberg | Getty Images

After American Express reported that cardmembers are continuing to rein in spending, one analyst is suggesting that investors look elsewhere in the consumer finance industry for earnings momentum.

While American Express met analyst expectations with earnings of $1.09 a share, David Darst, an analyst at Guggenheim Securities, told CNBC that "underlying revenue trends were somewhat disappointing."

Revenue grew at its slowest rate in 11 quarters, increasing 4 percent to $7.86 billion from $7.57 billion a year ago.

Cardmember spending increased just 6 percent globally, down from 7 percent in the second quarter.

Paydown rates are decelerating as well, showing consumers are not deleveraging as quickly as before.

Darst said that while American consumers have bounced back from the recession, the generally more-affluent American Express cardholders "actually recovered faster from the crisis, so you're seeing some natural slowing down" in their spending.

Darst downgraded American Express to "neutral" after this trend started to show up in the second quarter earnings report.

Instead, he has "buy" ratings on Capital One Financial and Discover Financial, which should have better earnings momentum than American Express.

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Disclosures:

Guggenheim gets investment banking revenue from American Express.

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