Tags: amex | earnings | profit | costco

AmEx Revenue Misses Estimates as Lender Pinched by Costco Loss

Friday, 17 Apr 2015 08:39 AM

American Express Co., this year’s worst performer in the Dow Jones Industrial Average, reported first- quarter revenue that missed analysts’ estimates as the dollar strengthened and the lender ended its relationship with Costco Wholesale Corp.

Net income climbed 6.5 percent to $1.53 billion, or $1.48 a share, from $1.43 billion, or $1.33, a year earlier, the New York-based company said Thursday in a statement. The average estimate of 14 analysts surveyed by Bloomberg was for profit of $1.37 a share.

Chief Executive Officer Ken Chenault is under pressure to recover from setbacks, including the end of a partnership with Costco in the U.S. and Canada. In recent months, he has announced new co-brand card deals, rewards programs and technology investments.

“These results came against the negative impact of a sharply stronger U.S. dollar, an uneven global economy, and the long-term renewal of several co-brand relationships,” Chenault, 63, said in the statement. “We also felt the impact from ending our relationship with Costco Canada, which expired at year- end.”

Net revenue declined 2.7 percent to $7.95 billion from a year earlier, missing the $8.18 billion average estimate of analysts surveyed by Bloomberg.

Card Spending

Consolidated expenses fell 1 percent to $5.2 billion, adjusted for currency fluctuations. Excluding some one-time items, expenses rose 5 percent as the company spent more on rewards programs, according to the statement. Customer card spending increased 7 percent to $245.6 billion, adjusted for currency swings.

“If this is supposed to be the best quarter of the year, which is what they’ve hinted at, then we don’t have a lot to look forward to on an earnings perspective,” said Jason Arnold, an RBC Capital Markets analyst. “The headline number looks good but when you dig into the guts, not so much.”

AmEx fell 1.3 percent to $79.89 at 5:15 p.m. in New York. The shares declined 13 percent through the end of regular trading, compared with the 1.6 percent advance of the 30-company Dow.

The lender, which announced in February that it will terminate its agreement with Costco in the U.S. in 2016, expects earnings this year to “be flat to modestly down,” Chenault said in the statement. The partnership with the Issaquah, Washington-based retailer accounted for 20 percent of AmEx’s worldwide loans and 8 percent of customer spending.

AmEx also is ending its relationship with JetBlue Airways Corp., and lost an antitrust ruling that would let merchants steer customers to cheaper cards, which could threaten the firm’s ability to charge higher merchant fees.

The lawsuit, which AmEx is appealing, is “potentially transformative to the company,” according to William Ryan, a Portales Partners LLC analyst. “Should the company’s premium pricing be eroded, the company will basically begin to look more like its peers.”

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American Express Co., this year's worst performer in the Dow Jones Industrial Average, reported first-quarter revenue that missed analysts' estimates as the dollar strengthened and the lender ended its relationship with Costco Wholesale Corp.Net income climbed 6.5 percent...
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2015-39-17
Friday, 17 Apr 2015 08:39 AM
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