American Express (AXP) reported its second-quarter earnings on Friday, presenting a mixed bag of results that reflected both strong profitability and some shortcomings in key revenue metrics. The company’s shares experienced a notable drop of more than 4% shortly after the market opened, despite exceeding profit expectations, due to its revenue and net interest income (NII) falling short of analysts’ forecasts.
For the quarter ending June 30, American Express achieved record revenue of $16.33 billion. This figure marked a significant milestone for the company, surpassing previous revenue records. However, it did not meet the expectations of Wall Street analysts, who had forecasted revenue of $16.56 billion. Despite the revenue miss, the company’s profit figures were more favorable. American Express reported earnings of $3.02 billion, or $4.15 per share. This result significantly exceeded the consensus estimates of $2.37 billion in profits and $3.26 per share, according to data compiled by Visible Alpha. The stronger-than-expected profit was partly bolstered by a $0.66 per share boost from the recent sale of Accertify, a fraud prevention company that American Express had acquired in 2010. This sale played a crucial role in enhancing the company’s overall earnings for the quarter.
On the other hand, the report revealed a decline in net interest income, a key revenue metric for financial institutions. American Express reported an NII of $3.73 billion, down slightly from $3.77 billion in the previous quarter. This decline was contrary to analysts’ expectations, which had projected an increase in NII to $3.8 billion. The sequential decrease in NII mirrored trends observed across the broader banking sector, where many institutions have reported similar declines.
In response to the mixed results, CEO Stephen Squeri provided a positive outlook for the company’s performance for the remainder of the fiscal year. He affirmed American Express’s revenue growth projections, expecting an increase of 9% to 11%. Furthermore, the company revised its EPS forecast upward, projecting a range of $13.30 to $13.80, an improvement from the earlier guidance of $12.65 to $13.15. This revision suggests confidence in continued robust performance despite the revenue and NII shortfalls, with the revised EPS projection exceeding the current analyst consensus of $12.99 per share.
Squeri attributed the growth in both top- and bottom-line figures to several key factors. These included a rise in billings, the acquisition of over 3 million new cardholders, and a substantial increase in card fee revenue. These factors collectively contributed to the company’s strong profit results for the quarter, despite the challenges faced in achieving revenue and NII expectations. The company’s performance highlights its ongoing ability to drive growth and profitability, even in the face of broader financial sector trends and expectations.