American Express Earnings: Here is What You Need to Know

From New York after market closure Wednesday, American Express (NYSE: AXP) reported a Q2 EPS of $1.15 in its quarterly earnings report, which was 5 cents (4.5 percent) better than expected, but revenue of $8 billion – which was 5 percent better than a year ago – missed expectations by $80 million (1 percent). Shares in the company’s stock slipped initially by 0.6 percent, but Thursday – in the light of day of early-morning trading – it was sliding, down 4 percent to $56 per share.

Net income for the company was reported at $1.3 billion, up 1 percent over the same quarter in 2011, but expenses were up 2 percent (4 percent when accounted for currency) – this despite marketing, rewards and employee pay all being lower than in 2011. Cardmember spending was up 9 percent (7 percent accounting for currency) and loans increased 4 percent.

Kenneth I. Chenault, CEO, said, “Consumer, small business and corporate cardmember spending, along with the business volumes generated by our network of bank partners, remained healthy despite a very uneven economy. Overall, cardmember spending rose 7 percent, or 9 percent adjusted for foreign currency translations. That’s slower than the increases we’ve seen in the recent quarters, but it comes on top of a very strong performance a year ago, and continues to grow faster than most of our large issuer competitors. Given the uncertain economic outlook, we remained vigilant in managing discretionary expenses but continued to make substantial investments in marketing initiatives and leverage our loyalty programs to connect millions of consumers and businesses around the world. This helped to continue strengthening our relationships with merchants and cardmembers at a time when mobile and digital technologies are opening up a range of new possibilities.”

Seemed that Chenault’s words in announcing the earnings are ringing hollow on the Street, which affects hedge funds like Warren Buffett’s Berkshire Hathaway and Jean-Marie Eveillard’s First Eagle Asset Management. At the end of March, Berkshire had $8.8 billion invested in AXP, while First Eagle was in for $568 million (increasing its shock hold by 2 percent during the quarter).