Amex falls as profit forecast fails to match rosiest predictions

Register now

American Express Co. said it still expects to boost profits this year. It wasn’t enough.

Shares of the credit-card lender fell in late trading after it reiterated that 2018 earnings would be at the high end of the previously forecast range of $6.90 to $7.30 in 2018, which would exceed 2017 results.

Analysts had expected the New York-based firm to boost its forecast as consumers increased spending on its cards. Worldwide billed business, a measure of customer card spending, did jump 10 percent to $296.5 billion in the second quarter, topping analysts’ estimates of $294.1 billion.

The world’s largest credit-card issuer by purchases said revenue climbed 9 percent to $10 billion in the second quarter, just missing the $10.1 billion average of 21 analyst estimates compiled by Bloomberg.

Shares dropped 3.7 percent to $100 at 4:31 p.m. in extended New York trading. The stock has climbed 4.8 percent this year.

Amex has had to cut prices so that more merchants will accept its cards, in a quest to reach parity coverage with Visa Inc. and Mastercard Inc. next year. That means customers will start seeing Amex’s blue logo at smaller stores that have long held out against the cards because of higher fees. AmEx has warned the company’s discount rate, a measure of the fees it charges merchants, will decline by 5 to 6 basis points this year.

Amex won a years-long legal battle in the second quarter when the U.S. Supreme Court threw out a lawsuit filed by the U.S. government and 11 states that accused the firm of thwarting competition by prohibiting merchants from steering customers to cards with lower fees.

Here’s a quick summary of key numbers from Amex’s results for the second quarter, announced Wednesday in a statement:

Net income increased 21 percent to $1.62 billion, or $1.84 a share, from $1.3 billion, or $1.47, a year earlier. The average estimate of 27 analysts surveyed by Bloomberg was for adjusted profit of $1.83 a share. Expenses jumped 7 percent to $7.1 billion, fueled by an increase in marketing and business development costs. That was better than the $7.26 billion analysts had predicted. The credit-card firm had to set aside $806 million to cover souring loans in the quarter. That was better than the $825 million average of 17 analyst estimates compiled by Bloomberg.

Bloomberg News
Credit cards Earnings American Express