NEW YORK CITY (dpa-AFX) - American Express Co. (AXP) Wednesday reported a drop in third-quarter profit, hurt largely lower revenues reflecting the absence of Costco portfolio. However, earnings for the quarter easily trumped estimates, as did revenues. The company also lifted its full year outlook.
New York-based American Express' third-quarter profit dropped to $1.14 billion or $1.20 per share from $1.27 billion or $1.24 per share a year ago.
Adjusted earnings for the quarter were $1.24 per share. On average, 28 analysts polled by Thomson Reuters expected earnings of $0.96 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 5 percent to $7.77 billion from $8.19 billion a year ago. Twenty-two analysts had a consensus revenue estimate of $7.72 billion for the quarter.
The company said the quarter included higher spending on growth initiatives, largely reflected in marketing and promotion expenses.
Last year results also include business related to the company's relationship with Costco.
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.
Excluding the Costco-impact, 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.
Moving ahead, AmEx now expects full-year earnings of $5.90 to $6.00 per share up from prior outlook of $5.40 to $5.70 per share. The company continues to expect 2017 earnings to be $5.60 per share.
Analysts currently estimate earnings of $5.51 per share for 2016 and $5.54 for 2017.
'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,' Chairman and CEO Kenneth Chenault said.
AXP closed Wednesday's trading at $61.25, up $1.17 or 1.95%, on the NYSE. The stock further rose $2.70 or 4.41% in the after-hours trade.
Copyright RTT News/dpa-AFX