Should You Be Worried About American Express (AXP)’s Earnings Announcement?

In the world of membership rewards, customers have to spend more to earn more. So, as the reimbursement rate increases, it’s a sign that American Express is enjoying higher customer spending — an 8% increase for the fourth quarter to be exact. In addition to strong revenue generation, that increase shows the power of AmEx’s market share, considering the effect of Hurricane Sandy on consumers and businesses along the East Coast during the fourth quarter.

With our apologies
The final charge was one that American Express knew was coming. After several regulatory reviews of the company’s business practices, they agreed to reimburse customers that had been charged fees and interest or lost rewards due to company missteps. The $153 million effect of that agreement seems much more substantial since it encompasses reimbursements for items spanning 5-6 years, according to Chenault. While the company may report other reimbursements down the road, investors shouldn’t expect an impact like the one we’ll see in the fourth-quarter results.

In the end…
American Express has already beaten most analyst expectations with the information it released ahead of schedule. With revenues up 5% and adjusted net income hovering around 2011 levels, the company continues to report strong results. In spite of the 46% hit AmEx will take on its unadjusted net income from the three charges outlined, investors should be expecting the stock to perform well and be pleased with the company’s results.

The article Should You Be Worried About This Consumer Finance Company’s Earnings Announcement? originally appeared on Fool.com.

Jessica Alling has no position in any stocks mentioned. The Motley Fool recommends American Express. The Motley Fool owns shares of Bank of America, Citigroup, and JPMorgan Chase & Co. (NYSE:JPM).

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