Banking, finance, and taxes
American Express Down 21%, Worst of Dow Stocks
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The Dow Jones Industrial Average is off 7.64% this year to 16,093.51, after a mad rally pushed it up from a much deeper hole. The leading loser among the index’s 30 components is America Express Co. (NYSE: AXP), off 20.82% to $55.06. Of that drop, 12.1% happened Friday after the latest in a line of disappointing quarterly earnings.
American Express reported that total revenue less interest expense dropped 4% to $32.8 billion for 2015. Earnings per share (EPS) were off 9% to $5.05. The fourth quarter was worse. Revenue less interest expense dropped 8% to $8.4 billion, and EPS were off 36% to $0.89.
The American Express forecast was dire. Kenneth I. Chenault, chairman and chief executive officer, said:
For 2017, we are now targeting EPS of at least $5.60. That includes growing over the portfolio gain and this year’s Costco-related earnings. It also includes a combination of accelerated revenue growth, aggressive expense reductions and the use of our capital strength to create value for shareholders. The 2016-17 earnings targets do not include restructuring charges or other contingencies.
Chenault’s excuse was not convincing:
We have a great set of assets to draw upon, including a trusted brand, financial strength, an integrated business model, world class service and a history of innovation. We’re confident that we’ll not just deal with our near-term challenges, but return to growth and position the company for long-term success.
That success will be driven to some extent by nearly $1 billion in cost cuts, which eventually may not matter at all.
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