Banking & Finance

American Express Tumbles on Missed Earnings

Credit cards
Source: Thinkstock
American Express Co. (NYSE: AXP) reported its third quarter financial results after the markets closed on Wednesday. The company had $1.24 in earnings per share (EPS) on $8.19 billion in revenue compared to Thomson Reuters consensus estimates of $1.31 in EPS on $8.32 billion in revenue. In the same period last year the company reported $1.40 in EPS on $8.30 billion in revenue.

In terms of guidance, the company now expects full year 2015 EPS to be between $5.20 and $5.35. American Express believes that its outlook to return to positive earnings per share growth in 2016 and within the target range of 12% to 15% in 2017 remains appropriate. There are EPS consensus estimates of $5.49 and $5.71 for 2015 and 2016, respectively.

In terms of the segments the company reported:

  • U.S. Card services had total revenues net of interest expense increase by 5% to $4.7 billion, from $4.5 billion a year ago.
  • International Card Services had total revenues net of interest expense of $1.2 billion, down 11% from $1.4 billion a year ago.
  • Global Commercial Services had total revenues net of interest expense of $817 million, down 9% from $900 million a year ago.
  • Global Network & Merchant Services had total revenues net of interest expense of $1.4 billion, down 6% from $1.5 billion a year ago.

Kenneth I. Chenault, Chairman and CEO of American Express, commented on earnings:

While overall results were in line with our 2015 financial outlook, the quarter reflected the headwinds and challenges that we have been dealing with throughout this year. Reported revenue and billed business levels were suppressed by a stronger U.S. dollar. In addition, the renewals and changes that we made earlier this year to some co-brand relationships also entailed some significant incremental expenses this quarter.

He added:

Against the backdrop of a challenging environment and an uneven global economy, we continued to move forward with initiatives to build our business for the years ahead. With our Costco relationship set to end in the U.S. next year, we’re investing substantially more in marketing, incentives and technology to attract a range of new Card Members and additional spending across our network. We’re expanding card acceptance at an accelerated pace among smaller merchants and also added Sam’s Club, the eighth largest retailer in the U.S., to our network earlier this month. We’re broadening our relationships with Card Members to accommodate more of their borrowing needs, and our loan portfolio continued its steady growth this quarter.

Shares of American Express closed Wednesday down 0.6% at $76.51, with a consensus analyst price target of $83.40 and a 52-week trading range of $71.71 to $94.89. Following the release of the earnings report shares were down 2.3% at $74.75 in the after-hours trading session.

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