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Share Name | Share Symbol | Market | Type |
---|---|---|---|
American Express Company | NYSE:AXP | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
1.58 | 0.67% | 236.24 | 236.85 | 233.52 | 234.66 | 2,498,433 | 00:37:51 |
Raises Full Year Guidance and Reaffirms 2017 Outlook
American Express Company (NYSE:AXP) today reported third-quarter diluted earnings per share of $1.20, down 3 percent from $1.24 a year ago. Excluding a restructuring charge related to cost reduction efforts, adjusted diluted earnings per share was $1.24.2
(Millions, except percentages and per share amounts)
Quarters EndedSeptember 30,
PercentageInc/(Dec)
Nine Months EndedSeptember 30,
PercentageInc/(Dec)
2016 2015 2016 2015 Total Revenues Net of Interest Expense $ 7,774 $ 8,193 (5) $ 24,097 $ 24,427 (1) Net Income $ 1,142 $ 1,266 (10) $ 4,583 $ 4,264 7 Earnings Per Common Share – Diluted:Net Income Attributable to Common Shareholders1
$ 1.20 $ 1.24 (3) $ 4.76 $ 4.15 15 Average Diluted Common Shares Outstanding 923 997 (7) 943 1,011 (7) Return on Average Equity 26.1 % 26.8 % 26.1 % 26.8 %Third-quarter net income was $1.1 billion, down 10 percent from $1.3 billion a year ago.
The current quarter included higher spending on growth initiatives, largely reflected in marketing and promotion expenses, as well as solid progress related to company’s efforts to reduce its cost base. Credit quality remained strong, and the company returned a substantial amount of capital to shareholders through share repurchases and dividends. Year-ago results included business related to the company’s relationship with Costco that ended earlier this year.
Third-quarter consolidated total revenues net of interest expense were $7.8 billion, down 5 percent from $8.2 billion a year ago. Excluding the impact of Costco-related revenues in the year ago-period, adjusted revenues net of interest expense increased 5 percent, reflecting a rise in Card Member spending, along with higher net interest income and net card fees.3
Consolidated provisions for losses were $504 million, down 5 percent from $529 million a year ago. The prior year included credit costs associated with cobrand portfolios that were sold earlier this year. Excluding the impact of those cobrand portfolios, adjusted provisions for losses increased 6 percent, primarily reflecting higher loan growth.4
Consolidated expenses were $5.5 billion, down 3 percent from $5.7 billion a year ago. The prior year included Costco-related rewards costs, and an impairment of goodwill and technology assets. The current quarter reflected the higher levels of investment spending on growth initiatives and the restructuring charge mentioned above. These were offset in part by lower technology costs. Operating expenses were down 3 percent versus the prior year.5
The effective tax rate for the quarter was 34 percent, down from 35 percent a year ago.
The company’s return on average equity (ROE) was 26 percent, down from 27 percent a year ago.
“Strong operating discipline and credit quality helped to keep us ahead of the 2016 financial outlook that we first provided at the beginning of the year,” said Kenneth I. Chenault, chairman and chief executive officer. “While reported revenues were down 5 percent, we saw underlying revenue growth of 5 percent after adjusting for the absence of Costco-related business this quarter – slightly faster than comparable second-quarter levels.3 Adjusted billed business was up 7 percent, adjusted loan growth remained healthy and net card fees rose 10 percent, reflecting strong performance across our premium card portfolios.
“The underlying performance reflected our broad, diversified business model as well as the relationships we’ve built over many years with Card Members who value the range of benefits and service that come with membership. Strength in our consumer business, growth internationally, the benefits of a larger merchant network and a broader presence among smaller and mid-sized companies offset softness in spending by large corporate Card accounts.
“Separate from our operating results,” Mr. Chenault said, “we received a favorable ruling in our ongoing antitrust litigation with the U.S. Department of Justice. By reversing an earlier lower court decision, the appellate judges upheld provisions within our merchant contracts that protect consumer choice, support competition and allow us to deliver superior products and services to our customers.
“Going forward we remain focused on three priorities: accelerate revenue growth, reset our cost base and optimize our investments.” Mr. Chenault added, “We’re making progress on initiatives that include a renewed emphasis on our Platinum Card portfolios, which provide service, access and benefits that have been the benchmark of value for more than 30 years. We’re launching our most extensive campaign yet to build on the success of Small Business Saturday and drive additional spending at neighborhood businesses in a way that leverages the ongoing expansion of our merchant network in the U.S. In addition, we’re going to continue to utilize digital marketing capabilities that helped to bring on a record 5.9 million new cards across our U.S. issuing businesses and 8.5 million cards globally this year. With these and other initiatives coming together at the start of the peak shopping season, we expect it to be a very active fourth quarter and we’ll be supporting all of our work with an extensive advertising campaign.
“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. While there’s more work and more challenges ahead, the investments we’re making are designed to position us for profitable, sustainable growth over the longer term, and we remain on track to earn at least $5.60 per share in 2017.”
The company now expects GAAP earnings per share for 2016 to be between $5.65 and $5.75, which includes the restructuring charges taken in the first three quarters of 2016. The adjusted earnings per share outlook, which excludes restructuring charges, is now $5.90 to $6.00. This is higher than the prior estimate of adjusted full year earnings per share at the high end of the company’s initial $5.40 to $5.70 range.6
Segment Results
U.S. Consumer Services reported third-quarter net income of $401 million, down 26 percent from $542 million a year ago. The year-ago period included Costco-related revenues, provisions and expenses.
Total revenues net of interest expense decreased 13 percent to $2.9 billion, from $3.3 billion a year ago.
Provisions for losses totaled $275 million, down 6 percent from $294 million a year ago.
Total expenses were $2.0 billion, down 7 percent from $2.2 billion a year ago. The prior year included Costco-related rewards costs, offset by higher investment spending on growth initiatives this quarter.
The effective tax rate was 35 percent compared to 37 percent a year ago.
International Consumer and Network Services reported third-quarter net income of $155 million, up 1 percent from $154 million a year ago.
Total revenues net of interest expense were $1.4 billion, up 5 percent (up 7 percent FX-adjusted7) from $1.3 billion a year ago. The increase primarily reflected higher Card Member spending and net card fees.
Provisions for losses totaled $84 million, up 9 percent from $77 million a year ago.
Total expenses were $1.1 billion, up 5 percent (up 7 percent FX-adjusted7) from $1.0 billion a year ago. The increase reflected higher investment spending on growth initiatives.
The effective tax rate was 25 percent, up from 23 percent a year ago.
Global Commercial Services reported third-quarter net income of $466 million, unchanged from a year ago. The year-ago period included Costco-related revenues, provisions and expenses.
Total revenues net of interest expense were $2.4 billion, unchanged from a year ago. The prior year included Costco-related revenues, offset by higher Card Member spending and higher net card fees in the current quarter.
Provisions for losses totaled $134 million, down 9 percent from $148 million a year ago.
Total expenses were $1.6 billion, up 1 percent from $1.5 billion a year ago. The current quarter reflected higher investment spending to support growth initiatives.
The effective tax rate was 36 percent, down from 37 percent a year ago.
Global Merchant Services reported third-quarter net income of $359 million, down 10 percent from $397 million a year ago. The year-ago period included Costco-related revenues.
Total revenues net of interest expense were $1.1 billion, down 6 percent from $1.2 billion a year ago.
Total expenses were $525 million, unchanged from a year ago. The year-ago period benefited from a litigation reserve reversal. Expenses for the current quarter benefited from growth of the OptBlue program, which does not include merchant acquirer payments.
The effective tax rate was 37 percent, unchanged from a year ago.
Corporate and Other reported third-quarter net loss of $240 million compared with net loss of $295 million a year ago.
About American Express
American Express is a global services company, providing customers with access to products, insights and experiences that enrich lives and build business success. Learn more at americanexpress.com and connect with us on facebook.com/americanexpress, foursquare.com/americanexpress, linkedin.com/company/american-express, twitter.com/americanexpress, and youtube.com/americanexpress.
Key links to products, services and corporate responsibility information: charge and credit cards, business credit cards, Plenti rewards program, travel services, gift cards, prepaid cards, merchant services, corporate card, business travel and corporate responsibility.
This earnings release should be read in conjunction with the Company’s statistical tables for the third quarter 2016, available on the American Express website at http://ir.americanexpress.com and in a Form 8-K filed today with the Securities and Exchange Commission.
An investor conference call will be held at 5:00 p.m. (ET) today to discuss third-quarter earnings results. Live audio and presentation slides for the investor conference call will be available to the general public on the above-mentioned American Express Investor Relations website. A replay of the conference call will be available later today at the same website address.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. The forward-looking statements, which address the Company’s expected business and financial performance and which include management’s outlook for 2016-2017, among other matters, contain words such as “believe,” “expect,” “estimate,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The Company undertakes no obligation to update or revise any forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements, include, but are not limited to, the following:
A further description of these uncertainties and other risks can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 2016 and the Company’s other reports filed with the Securities and Exchange Commission.
_______________________
1 Represents net income less (i) earnings allocated to participating share awards of $9 million and $10 million for the three months ended September 30, 2016 and 2015, respectively, and $37 million and $32 million for the nine months ended September 30, 2016 and 2015, respectively, and (ii) dividends on preferred shares of $21 million and $22 million for the three months ended September 30, 2016 and 2015, respectively, and $61 million and $42 million for the nine months ended September 30, 2016 and 2015, respectively.
2 Adjusted diluted earnings per share (EPS), a non-GAAP measure, excludes a $44MM pretax restructuring charge ($28MM after-tax). Management believes adjusted EPS is useful in evaluating the ongoing operating performance of the company and the company’s performance against its EPS outlook provided in the company’s Q4’15 earnings release on January 21, 2016, at which point restructuring charges and other contingencies were not estimable and thus not included in the outlook. See Appendix I for a reconciliation to EPS on a GAAP basis.
3 Adjusted revenues net of interest expense, a non-GAAP measure, excludes from prior-year results estimated revenues from Costco in the U.S., Costco U.S. cobrand Card Members and other merchants for out-of-store spend on the Costco cobrand card. Management believes adjusted revenues net of interest expense is useful in evaluating the ongoing operating performance of the company following the end of the Costco U.S. relationship. See Appendix I for a reconciliation to total revenues net of interest expense on a GAAP basis.
4 Adjusted provisions for losses excludes from prior-year results Card Member balances related to cobrand partnerships with Costco in the U.S. and JetBlue, which were reclassified as held for sale effective December 2015. See Appendix I for reconciliations to consolidated provision for losses, on a GAAP basis. Management believes the presentation of adjusted provision for losses is useful in evaluating the ongoing performance of the company’s loan portfolio.
5 Operating expenses represent salaries and employee benefits, professional services, occupancy and equipment, and other, net.
6 The company’s adjusted EPS outlook, a non-GAAP measure, excludes $360MM of pretax restructuring charges ($234MM after-tax) recognized in the first three quarters of 2016 as well as any restructuring charges or other contingencies that may be incurred during the remainder of 2016, which management is not able to estimate. Management believes the presentation of an adjusted EPS outlook is useful as it is consistent with the outlook provided in the company’s Q4’15 earnings release on January 21, 2016, at which point restructuring charges and other contingencies were not estimable and thus not included in the outlook. See Appendix I for a reconciliation to EPS on a GAAP basis.
7 As reported in this release, FX-adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translations into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the three months ended September 30, 2016 apply to the period(s) against which such results are being compared). FX-adjusted revenues and expenses constitute non-GAAP measures. Management believes the presentation of information on an FX-adjusted basis is helpful to investors by making it easier to compare the company’s performance in one period to that of another period without the variability caused by fluctuations in currency exchange rates.
American Express Company
(Preliminary)
Appendix I Reconciliations of Adjustments (Millions, except percentages, per share information and where indicated) Quarters Ended September 30, September 30,YOY %
2016 2015Change
Adjusted Total Revenues Net of Interest Expense (billions)
Total Revenues Net of Interest Expense $ 7.8 $ 8.2 (5 ) Costco Related Revenues (A) - ~ 0.8 Adjusted Total Revenues Net of Interest Expense $ 7.8 $ 7.4 5Adjusted Total Provisions for Losses
Total Provisions for Losses $ 504 $ 529 (5 ) Cobrand reclass to Other, net Expense (B) - (54 ) Adjusted Total Revenues Net of Interest Expense $ 504 $ 475 6Earnings per Share (EPS)
Q3'16 EPS $ 1.20 $ 1.24 (3 ) Q3'16 restructuring charge per share (pre-tax) 0.05 - Tax impact of Q3'16 restructuring charge per share (0.01 ) - After-tax impact of Q3'16 restructuring charge per share $ 0.04 $ - Q3'16 Adjusted EPS - normalized for Restructuring charges $ 1.24 $ 1.24 -2016 Earnings per Share (EPS) Outlook
FY'16 EPS Range EPS Outlook excluding restructuring charges and other contingencies $ 5.90 $ 6.00 Q1'16 restructuring charge per share (pre-tax) 0.08 0.08 Tax impact of Q1'16 restructuring charge per share (0.03 ) (0.03 ) After-tax impact of Q1'16 restructuring charge per share $ 0.05 $ 0.05 Q2'16 restructuring charge per share (pre-tax) 0.25 0.25 Tax impact of Q2'16 restructuring charge per share (0.09 ) (0.09 ) After-tax impact of Q2'16 restructuring charge per share $ 0.16 $ 0.16 Q3'16 restructuring charge per share (pre-tax) 0.05 0.05 Tax impact of Q3'16 restructuring charge per share (0.01 ) (0.01 ) After-tax impact of Q3'16 restructuring charge per share $ 0.04 $ 0.04 US GAAP EPS Outlook - Including YTD Restructuring (C) $ 5.65 $ 5.75
(A)
Represents estimated Discount revenue from Costco in the U.S. for spend on all American Express cards and from other merchants for spend on the Costco cobrand card as well as Other fees and commissions and Interest income from Costco cobrand Card Members.
(B)
Beginning December 1, 2015 through to the sale completion dates, Total provision for Losses did not reflect the held for sale portfolios, as credit costs were reported in Other, net expense through a valuation allowance adjustment.
(C)
Reflects restructuring charges recognized in the first three quarters of 2016. Management is not able to estimate restructuring charges or other contingencies for the remainder of 2016.
View source version on businesswire.com: http://www.businesswire.com/news/home/20161019006327/en/
Media:Marina H. Norville, +1-212-640-2832marina.h.norville@aexp.comorInvestors/Analysts:Ken Paukowits, +1-212-640-6348ken.f.paukowits@aexp.comToby Willard, +1-212-640-5574sherwood.s.willardjr@aexp.com
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