American Express misses forecasts, hurt by Costco loss

AP News
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Posted: Jan 19, 2017 4:50 PM
American Express misses forecasts, hurt by Costco loss

NEW YORK (AP) — American Express' fourth-quarter profit fell 8 percent from the same period a year earlier, hurt by the loss of the Costco credit card business and higher expenses to retain customers.

The company said it had a modest increase in delinquencies, a not good sign for a company whose customers are marketed among the most creditworthy and well-to-do in the country.

The New York-based credit card company said it earned $825 million, or 88 cents a share, down from $899 million, or 89 cents per share, in the same period a year ago. The results came in well short of what Wall Street analysts were looking for, who expected AmEx to earn 98 cents per share according to FactSet.

AmEx is in transition following the loss of the Costco credit card business in 2016. The retail giant moved its credit card processing to Visa, and Citigroup won the credit card portfolio. Before this happened, Costco represented a sizeable portion of American Express' credit card loans and its billed business. To recover, AmEx has been focusing on retaining those customers through promotions and marketing and developing new offerings.

"While we continue to operate in a very challenging environment, we ended the year in a stronger position than we started and have built momentum across our business," Kenneth Chenault, AmEx chairman and CEO, said in a prepared statement.

AmEx's U.S. consumer business, the company's biggest division by revenue and profit, reported quarterly earnings of $351 million, down 35 percent from a year earlier. The year-earlier quarter included revenue from Costco.

The U.S. consumer business had to set aside $363 million to cover delinquencies and charge-offs, up 9 percent from a year ago.

In his prepared comments, Chenault said he expects AmEx to earn between $5.60 and $5.80 a share for 2017, which was slightly above the $5.58 per share that analysts were expecting for the company this year.

The credit card issuer and global payments company posted revenue of $8.02 billion in the period, beating analysts' estimate of $7.93 billion, according to FactSet.

American Express shares have climbed 3.5 percent since the beginning of the year, while the Standard & Poor's 500 index has climbed 1 percent. In the final minutes of trading on Thursday, shares hit $76.69, a rise of 22 percent in the last 12 months.

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This story was partially generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on AXP at https://www.zacks.com/ap/AXP