American Express (AXP) Tops Q2 EPS by 15c

American Express (NYSE: AXP) reported Q2 EPS of $2.10, $0.15 better than the analyst estimate of $1.95. Revenue for the quarter came in at $8.2 billion versus the consensus estimate of $8.4 billion.

The effective tax rate for the quarter was 33 percent, down from 34 percent a year ago.

The company’s return on average equity (ROE) was 26.4 percent, down from 28.1 percent a year ago.

“Operating results were solid this quarter and consistent with the financial outlook we provided earlier in the year,” said Kenneth I. Chenault, chairman and chief executive officer. “We are making good progress on our initiatives to accelerate growth: acquiring 3 million new proprietary cards worldwide; generating additional spending on our global network; expanding merchant coverage; and continuing to meet the borrowing needs of Card Members while maintaining strong credit quality.

“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.

“We have returned a record amount of capital to shareholders so far this year, with share repurchases totaling $1.7 billion in the second quarter and a record $2.8 billion year to date. With our completion of the Federal Reserve’s annual stress test, we now plan to increase the quarterly dividend by 10 percent to 32 cents per share and repurchase up to an additional $3.3 billion shares over the next four quarters.

“As expected, the quarter included a substantial gain from the sale of the cobrand loan portfolio and a restructuring charge related to the initiative to reset our expense base. We also continued to see the impact of a lower merchant discount rate and a strong U.S. dollar on our international operations.

“Worldwide billed business grew 3 percent from a year ago. Adjusted for Costco/FX, those volumes rose 8 percent from a year ago. Total loans decreased 13 percent, while adjusted loans rose 13 percent after excluding the “Held for Sale” portfolios and the impact of foreign exchange rates.4 Those adjusted numbers benefited from increased usage of their other American Express Cards by former Costco cobrand Card Members.

“We’re encouraged by progress so far this year and plan to continue spending at elevated levels during the remainder of 2016 in order to capitalize on the opportunities we see in a very competitive marketplace. Notwithstanding that higher level of spending, we expect 2016 results to be at the high end of the range we shared earlier this year.5 Our expectations for 2017 remain unchanged, and we will stay focused on accelerating revenue growth, resetting our cost base and optimizing the investments we’re making in the business."

For earnings history and earnings-related data on American Express (AXP) click here.

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