American Express Profit Down On Charges; To Cut $1 Bln In Costs

(RTTNews) - American Express Co. (AXP) on Thursday reported a 38 percent drop in profit for the fourth quarter, hurt largely by lower revenues, higher expenses and restructuring charges. American Express also outlined its plans to cut $1 billion in costs.

New York-based American Express' fourth-quarter profit dropped to $899 million or $0.89 per share from $1.45 billion or $1.39 per share a year ago.

Amex recorded a $419 million charge that included an impairment of goodwill and technology assets, in addition to restructuring costs within the Enterprise Growth Group.

Adjusted earnings for the quarter were $1.23 per share. On average, 31 analysts polled by Thomson Reuters expected earnings of $1.13 per share for the quarter. Analysts' estimates typically exclude special items.

American Express, the biggest credit-card issuer on the basis of purchases, said revenues, net of interest expense, for the quarter dropped 8 percent to $8.39 billion from $9.08 billion a year ago. Twenty-four analysts had a consensus revenue estimate of $8.34 billion for the quarter.

U.S. Card Services business fourth-quarter profit dropped 20 percent to $665 million from $799 million a year ago.

The card issuer, however, said card member spending improved again and loan continued to rise.

Chief Executive Officer Ken Chenault said, "A number of cyclical factors in the broader economy have also weighed on our performance and influenced our outlook. Against that backdrop, and the fact that revenue growth has not accelerated as we anticipated, we are moving aggressively to streamline the company and drive efficiencies in order to take out $1 billion from our overall cost base by the end of 2017.

American Express is struggling after it lost its biggest business partner Costco Wholesale Corp., as Costco's contributed about 20 percent of AmEx's worldwide loans and 8 percent of customer spending. The company has started spending heavily on marketing and technology to improve its revenues and to lure new customers.

American Express' cardholders are mostly affluent consumers and businesses, which helps the company to perform better than its peers even during weak economic conditions. The company's results are keenly watched as it has a bearing on the state of luxury consumption.

Marketing and promotion expenses rose to $892 million from $887 million last year, while card member service rose 21 percent to $246 million.

For the full year 2016, the company expects earnings of $$5.40 to $5.70 per share. Analysts currently estimate earnings of $5.41 per share for 2016.

COST closed Thursday's trading at $62.64, down $0.39 or 0.62%, on the Nasdaq. The stock further dropped $1.54 or 2.46% in the after-hours trade.