American Express Posts Mixed Q3 Earnings

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American Express reported third-quarter earnings of $1.30 a share, missing Wall Street estimates of $1.34, but revenue beat forecasts of $8.66 billion, coming in at $8.75 billion. 

Overall, total revenue for 3Q, excluding interest expense, was $8.8 billion, down 20% from last year’s $11.0 billion due to lower card spending amid the pandemic.

“While our business continues to be significantly affected by the impacts of the pandemic, our third quarter results have increased our confidence that our strategy for managing through the current environment is the right one,” Stephen J. Squeri, chairman and chief executive officer, said in a statement on Friday (Oct. 23).

The COVID-19 pandemic has triggered the worst economic downturn in decades, with mass layoffs and lost revenues. American Express shares dropped 16% since January; 12% in the last 12 months.

Squeri added that earlier lows in April are rebounding, however, and “we have seen a steady recovery in our overall spending volumes.” 

He pointed to year-over-year growth in non-T&E spending and said delinquencies and net write-offs are “at the lowest levels we have seen in a few years.” 

American Express also reported that consolidated provisions for credit losses (PCL) dropped 24 percent to $665 million, compared to $879 million in 2019. Consolidated expenses dropped 14% to $6.7 billion from $7.8 billion in 2019. The consolidated effective tax rate was 21.3 percent, down from 22.6 percent a year ago.

 “The investments we have made to enhance our value propositions have yielded strong results, driving spending and loyalty, and our voluntary attrition rates on our proprietary products remain lower than last year,” Squeri said. 

He said the future is unclear, “but we are confident that the steps we are taking will enable us to exit this crisis in a strong position and maximize value for our stakeholders over the long term.”

American Express showed a surprising profit in the second quarter, but spending fallout caused by the pandemic triggered a steep drop in revenue.

 

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