American Express Raises Earnings Outlook -- 2nd Update
October 19 2016 - 7:04PM
Dow Jones News
By Robin Sidel and Anne Steele
American Express Co. reported stronger-than-expected earnings
and revenue for the third quarter and said it would aggressively
pursue a series of initiatives in the fourth quarter, including an
"extensive" advertising campaign and an increased emphasis on its
platinum card.
The New York-based card company said the quarterly results are
giving it fresh confidence to pump up investment spending during
the upcoming holiday shopping season.
"There is clearly still a lot of work to do, but we are pleased
with our results through the third quarter," said Chief Financial
Officer Jeffrey Campbell in a conference call with analysts. Shares
rose about 5% in after-hours trading.
AmEx also boosted its earnings guidance for 2017. The company
said it now expects earnings, excluding restructuring charges, of
$5.90 to $6 a share, up from its prior estimate for $5.40 to
$5.70.
"Strong operating discipline and credit quality helped to keep
us ahead" of the company's initial outlook, said Chief Executive
Kenneth Chenault, said in a statement.
The results follow a difficult period for AmEx. The company has
repeatedly fallen short of its revenue targets and has lost key
partnerships, including a 16-year relationship with Costco
Wholesale Corp.
Mr. Campbell warned that the company still faces challenges,
including a slowdown in corporate spending and intense competition
from rivals. At the same time, however, he said that credit trends
are better than the company had expected several months ago.
In all, American Express reported a profit of $1.14 billion, or
$1.20 a share, down from $1.27 billion, or $1.24 a share, a year
earlier. Excluding restructuring charges, earnings were flat at
$1.24 a share, beating analyst estimates for 97 cents a share,
according to Thomson Reuters.
Revenue fell 5.1% to $7.78 billion. The top line increased 5%,
however, excluding the impact of Costco-related revenue in the year
earlier-period, reflecting a rise in card member spending, along
with higher net interest income and net card fees.
The company, which earlier this year said it would cut $1
billion in costs, said its third-quarter expenses declined 3%.
In addition to the renewed emphasis on the platinum card and the
ad campaign, Mr. Campbell said that the company will introduce new
promotions for its "Small Business Saturday" event that encourages
consumers to shop at small businesses on the Saturday after
Thanksgiving.
"It will be a very active fourth quarter," Mr. Campbell
said.
AmEx won a big legal victory last month when a federal appeals
court tossed out an antitrust judgment against the company, ruling
that it could keep barring merchants from steering customers to
cards with lower merchant fees. The decision reversed a lower-court
ruling that had determined AmEx's rules for merchants violated
antitrust rules.
On the conference call, Mr. Campbell reminded analysts that the
Justice Department, which brought the antitrust case against AmEx,
has the right to appeal the most recent court decision.
Write to Robin Sidel at robin.sidel@wsj.com and Anne Steele at
Anne.Steele@wsj.com
(END) Dow Jones Newswires
October 19, 2016 18:49 ET (22:49 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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