American Express Q4 Profit Down

(RTTNews) - American Express Co. (AXP) Thursday reported a drop in fourth-quarter profit, as revenues declined 4 percent due to absence of Costco portfolio while provisions for bad loans and marketing costs increased. Earnings fell short of Wall Street estimates, while revenues trumped expectations.

New York-based American Express' fourth-quarter profit dropped to $825 million or $0.88 per share from $899 million or $0.89 per share a year ago.

Adjusted earnings for the quarter were $0.91 per share. On average, 27 analysts polled by Thomson Reuters expected earnings of $0.98 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 4 percent to $8.02 billion from $8.39 billion a year ago. Twenty-two analysts had a consensus revenue estimate of $7.95 billion for the quarter.

The company said the quarter included higher spending on growth initiatives, largely reflected in marketing and promotion expenses. The company showed significant progress on its plans to reduce its cost base by $1 billion, American Express said in a statement.

Excluding last year's Costco-related business and the effect of foreign exchange rates, adjusted revenues net of interest expense increased 6 percent, driven largely by higher card spending and interest income. Last year, AmEx ended a 16-year partnership with Costco Wholesale Corp.'s (COST).

Provisions for losses were $625 million, up 9 percent from a year ago, primarily reflecting higher loan growth.

Moving ahead, AmEx now expects full-year earnings of $5.60 to $5.80 per share up from prior outlook of $5.60 per share. Analysts currently estimate earnings of $5.75 for 2017.

"Card Member spending (adjusted for Costco and the impact of foreign exchange rates) grew 7 percent in the fourth quarter. That increase reflects continued strength in our international markets, accelerated growth among small and mid-sized companies and strong long-term relationships with higher spending consumers," said Chief Executive Officer Ken Chenault.

AXP closed Thursday's trading at $76.69, down $0.80 or 1.03%, on the NYSE. The stock further dropped $0.54 or 0.70% in the after-hours trade.