The FINANCIAL — American Express Co. on October 21 reported a 14 percent drop in profit for the third quarter, hurt largely by lower revenues and higher expenses. Earnings for the quarter missed Wall Street estimates, as did revenues, according to Nasdaq.
New York-based American Express’ third-quarter profit dropped to $1.27 billion or $1.23 per share from $1.48 billion or $1.40 per share a year ago. On average, 29 analysts polled by Thomson Reuters expected earnings of $1.31 per share for the quarter. Analysts’ estimates typically exclude special items.
American Express, the biggest credit-card issuer on the basis of purchases, said revenues, net of interest expense, for the quarter dropped 1 percent to $8.19 billion from $8.30 billion a year ago. Twenty-one analysts had a consensus revenue estimate of $8.32 billion for the quarter.
U.S. Card Services business third-quarter profit dropped 11 percent to $794 million from $889 million a year ago.
Chief Executive Officer Ken Chenault said, “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.
American Express’ stock has taken a beating this year after the company lost its business deal with co-brand partner Costco Wholesale Corp. The company has started spending heavily on marketing and technology to improve its revenue.
American Express’ cardholders are mostly affluent consumers and businesses, which helps the company to perform better than its peers even during weak economic conditions. The company’s results are keenly watched as it has a bearing on the state of luxury consumption.
Marketing and promotion expenses rose 8 percent to $847 million from $783 million last year, while card member service rose 31 percent to $269 million.
Looking forward to the full year, the company now expects earnings of $5.20 to $5.35 per share, compared to its prior estimate to be flat to modestly down from last year’s earnings of $5.56 per share. Analysts currently estimate earnings of $5.49 per share for the quarter.
AXP closed Tuesday’s trading at $76.51, down $0.44 or 0.57%, on the NYSE. The stock further slipped $2.31 or 3.02% in the after-hours trade.
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