American Express Q2 Profit Up

(RTTNews) - American Express Co. (AXP) Wednesday reported a surge in second-quarter profit, driven largely by a hefty gain from sale of Costco portfolio.

New York-based American Express' second-quarter profit rose to $2.02 billion or $2.10 per share from $1.47 billion or $1.42 per share a year ago.

AmEx recorded an after-tax gain of $677 million from the sale of its Costco U.S. co-brand card portfolio and a $151 million restructuring charge related to cost cutting measures.

On average, 26 analysts polled by Thomson Reuters expected earnings of $1.95 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 1 percent to $8.24 billion from $8.28 billion a year ago. Nineteen analysts had a consensus revenue estimate of $8.4 billion for the quarter.

Early this year, AmEx ended some of its major deals with with some key companies. American Express ended a 16-year partnership with Costco Wholesale Corp.'s (COST). In January, Fidelity Investments also dropped American Express and Bank of America Corp. as partners for its cash-back credit card, amid fierce competition, a relationship that lasted for about 12 years.

The adjusted revenues increased 1 percent, reflecting higher net card fees and net interest income, the company said.

"During the quarter, we again made substantial investments in marketing and technology to help grow the business. At the same time, operating expenses continued to be well managed, and we moved forward aggressively with plans to take $1 billion out of our cost base on a run-rate basis by the end of 2017," Chief Executive Officer Ken Chenault said.

Moving ahead, AmEx expects full-year earnings to be at the high end of the previously forecast range of $5.40 to $5.70 per share, while the company continues to expect 2017 earnings to be $5.60 per share.

Analysts currently estimate earnings of $5.55 per share for 2016 and 2017.

AXP closed Wednesday's trading at $64.48, up $0.32 or 0.50 %, on the NYSE. The stock further rose $0.82 or 1.27% in the after-hours trade.