American Express lifts revenue forecast

American Express shares drop after missing on revenue

FBN’s Susan Li reports on American Express’s second-quarter earnings.

American Express Co. raised its revenue forecast for the year, following a second consecutive quarter of strong results on higher card-member spending and loan growth.

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On Wednesday, the company said that given its financial performance for the first half of the year, it now expects revenue for the year to increase at least 9%, up from its earlier view of at least 8%. It maintained its view of earnings to be at the high end of $6.90 to $7.30 a share.

Card-member spending rose 10% in the most recent period and the company added 2.9 million cards, Chief Executive Stephen J. Squeri said in a statement.

"We continued our progress towards parity coverage in the U.S., expanded our network internationally and announced new card offerings with three important business partners — Amazon, Marriott, and Wells Fargo," he said.

Overall, AmEx reported a 21% increase in second-quarter profit to $1.62 billion, or $1.84 a share. Revenue, net of interest expense, rose 9% to $10 billion.

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​ Analysts surveyed by Thomson Reuters projected a profit of $1.82 a share on $9.84 billion in revenue.

Shares, which are up 3.7% this year, fell 3.4% to $99.50 in after-hours trading.

The company said last month it would raise quarterly dividend payouts and buy back up to $3.4 billion of common shares through next year's second quarter after clearing the Federal Reserve's annual stress test. The company temporarily stopped buying back its stock after a roughly $2.6 billion charge tied to the U.S. tax overhaul pushed it into its first quarterly loss in a quarter-century.

TickerSecurityLastChange%Chg
AXPAMERICAN EXPRESS COMPANY100.32-2.66-2.58%

Wednesday's financial report is the first since the company won a key legal challenge on its policy of preventing retailers from offering customers incentives to pay with cheaper cards.

Historically, AmEx has charged higher fees to merchants than other credit-card companies.

Justice Clarence Thomas, writing for the majority, said AmEx's higher merchant fees "to offer its cardholders a more robust rewards program, which is necessary to maintain cardholder loyalty and encourage the level of spending that makes AmEx valuable to merchants."

Card-members rewards, the company's largest single expense that includes points redeemed for hotels and airfare, reached $2.43 billion in the second quarter, up 11% from the year-ago period.

Overall, expenses rose 7% from the year-ago period.

Meanwhile, discount revenue — fees charged to merchants for accepting its cards — remained the company's largest revenue source at $6.19 billion, up 8% from the year earlier.

Spending on AmEx cards rose 10% to $296.5 billion globally, while card-member loans rose 14% to $75.4 billion.

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