First-Quarter Profit Up at American Express, But Revenue Miss Expectations

Andrew Klips |

First-Quarter Profit Up at American Express, But Revenue Miss ExpectationsAmerican Express Co. (AXP) reported after Wednesday’s closing bell that its profits and revenue rose in the first quarter of 2013 as card holders used their cards to spend more money while the company also benefited from higher member fees and net interest income.

The New York-based company said that revenue increased to $7.9 billion, up 4 percent from $7.6 billion in the first quarter of 2012. Net income rose to $1.28 billion, or $1.15 per share, topping the year prior quarter’s $1.26, or $1.07 per share, by 7 percent on a per-share-basis.

Wall Street was anticipating American Express to report EPS of $1.12 on revenue of $8.03 billion.

Total revenues net of interest expense increased 5 percent to $4.1 billion from $3.9 billion a year ago. The increase was driven by an 8 percent increase in cardmember spending and a 9.7 percent increase in net interest income. Net income from the company’s U.S. card services, by far its largest segment, jumped 7 percent to $804 million.

Net card fees rose 7 percent to $653 million from $610 million in Q1 2012.

Marketing, promotion, rewards and services related to cardmember expenses rose by 5 percent, helping raise total expenses by 3 percent to $2.5 billion during the quarter.

Consolidated provisions for losses increased 21 percent to $497 million from $412 million last year, largely because of a larger lending reserve, which was offset by lower net write-offs.

"We are off to a strong start in 2013, thanks to our ability to grow revenue in a slow growth economy, control expenses and maintain a strong balance sheet," said Kenneth I. Chenault, chairman and chief executive officer.

The company said that it also intends to raise its dividend by 15 percent to 23 cents per share next quarter. American Express also plans to repurchase up to $3.2 billion in common shares throughout the rest of 2013 and up to another $1 billion in common stock in the first quarter of 2014.

Since the markets collapsed and found a bottom late in 2008/early 2009, American Express has outpaced its higher-priced rivals Visa (V) and Mastercard (MA) in share appreciation. This may be in part because of Amex has primarily catered to more affluent individuals. All three credit card firms have delivered solid returns with Visa rising just over 300 percent in the past four years, while Mastercard shares have grown about 370 percent in value. American Express takes the prize, however, with returns in excess of 600 percent through Wednesday’s close from early-2009 lows.

Shares of AXP closed the day down by 0.7 percent at $64.13 and extended those losses in after-hours trading, despite topping expectations on earnings for the first quarter.

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Companies

Symbol Name Price Change % Volume
AXP American Express Company 64.04 0.67 1.06 4,306,976
STFKE STFKE n/a n/a n/a 0
V Visa Inc. 82.70 0.78 0.95 9,776,837

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