AmEx raises 2016 profit forecast; shares up 5.8 percent
By Sudarshan Varadhan
(Reuters) - American Express Co (AXP.N: Quote) raised its 2016 adjusted earnings forecast and reported better-than-expected third-quarter revenue on Wednesday, sending its shares up 5.8 percent in extended trading.
The credit card issuer, which has historically catered to upscale consumers, said it plans to increase spending on digital marketing, a strategy that helped it add 1.7 million new card members in the United States this quarter and expand globally.
The company raised its full-year adjusted earnings forecast to $5.90-$6.00 per share from $5.40-$5.70 and reaffirmed its 2017 forecast, driven by faster than expected progress on its cost cutting initiatives.
Analysts on average had expected the company to earn $5.50 per share in 2016, according to Thomson Reuters I/B/E/S.
AmEx, which cut total costs by about 3 percent this quarter, wants to save $1 billion by the end of 2017.
“The year-to-date progress gives us greater confidence to substantially increase our investment spending during the remainder of the year and, at the same time, raise our 2016 earnings guidance," Chief Executive Officer Kenneth Chenault said in a statement.
AmEx said it would renew emphasis on its Platinum cards, typically used by wealthy consumers, and on programs meant for customers outside its traditional base.
The company has "successfully" shifted towards non co-brand card members who produce good returns although they have a slightly higher write-off rate, Chief Financial officer Jeffrey Campbell said on a conference call with analysts. Continued...