American Express Co reports better-than-expected third-quarter revenue

21 Oct 2016

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American Express Co on Wednesday raised its 2016 earnings forecast after reporting better-than-expected third-quarter revenue. The company's shares rose 5.8 per cent on the report, in extended trading.

The credit card company which had historically catered to upscale consumers, said it planned to up spending on digital marketing, which it had successfully leveraged to add 1.7 million new card members in the US this quarter and expand globally.

The company upped its full-year adjusted earnings forecast to $5.90-$6.00 per share from $5.40-$5.70 and reaffirmed its 2017 forecast, on the basis of better than expected progress on its cost cutting initiatives.

Analysts on average had expected the company to pay $5.50 per share in 2016, Thomson Reuters I/B/E/S reported.

AmEx, which cut costs by about 3 per cent this quarter, is targeting savings of $1 billion by the end of 2017.

''The year-to-date progress gives us greater confidence to substantially increase our investment spending during the remainder of the year and, at the same time, raise our 2016 earnings guidance," chief executive officer Kenneth Chenault stated in a release.

According to AmEx, it would renew emphasis on its Platinum cards, used mostly by wealthy consumers, and on programmes meant for customers outside its traditional base.

The company reported adjusted earnings of $1.20 per share (EPS) on revenues of $7.77 billion.

Total costs fell 3 per cent to $5.5 billion and customer-reward spending dropped 11 per cent coupled with a 3 per cent drop in operating expenses.

"What they did is they cut back on rewards spending, so points or cashback rewards that you earn, they really trimmed that back by a couple hundred million dollars this quarter," Kyle Sanders, an Edward Jones analyst, said in a phone interview. "We think this is a strategic mistake. There's a ton of competition right now, with the Chase Sapphire card, with the new Costco card that Citi has,"www. thestreet.com reported.

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