American Express drops after missing Wall Street's fourth-quarter expectations

Key Points
  • The financial services company just missed analysts' expectations for fourth-quarter earnings and revenue on Thursday.
  • Shares of the company dropped 2.5 percent in after-hours trading.
  • The company more than doubled its annual profit from a year ago, bringing in $6.92 billion for 2018 compared with $2.75 billion in 2017.
A pedestrian walks by an American Express Travel Services office in San Francisco.
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American Express reported fourth-quarter revenue on Thursday that narrowly missed analysts' expectations and an earnings profit after reporting a loss for the same period a year ago.

Annual profit for the financial services company in 2018 was more than double what it was a year earlier, capping a solid year for AmEx.

Here's how the company did compared with what Wall Street expected:

  • Earnings: $1.74 adjusted earnings per share vs. estimates of $1.80 per share forecast by Refinitiv.
  • Revenue: $10.47 billion vs. $10.56 billion, forecast by Refinitiv

Shares of the credit card issuer fell roughly 2.5 percent in after-hours trading Thursday.

American Express brought in $10.47 billion in revenue for the fourth quarter of 2018, an 8 percent rise from a year earlier, according to the company. Still, the number was below the $10.56 billion expected by Wall Street.

American Express misses earnings mark

"This was the sixth consecutive quarter with revenue growth of at least 8 percent, and it was driven again by higher Card Member spending, loans and card fees," Stephen J. Squeri, American Express chairman and CEO, said in a press release.

American Express issued an upbeat forecast for 2019, partially thanks to consumer spending staying "reasonably strong."

Its full-year revenue guidance for growth was between 8 and 10 percent, versus Wall Street's expectations of 7.5 percent. The company's full-year earnings per share guidance was forecast to be between $7.85 and $8.35, in line with expectations of $8.12.

"While there are mixed signals in the political and economic environment, based on what we see in the business we are starting 2019 from a position of strength," Squeri said on a call with analysts following the report.

The company more than doubled its annual profit from a year ago. American Express brought in $6.92 billion for 2018 compared with $2.75 billion in 2017.

AmEx earned $2.32 per share in the fourth quarter, a significant improvement from a year ago, when it reported a loss of $1.42 per share for the same period. The comparable earnings amount, which excludes a U.S. tax benefit, was $1.74 per share, missing analysts' estimates of $1.80 per share forecast by Refinitiv.

Analysts have been keeping an eye on U.S. consumer spending, which tends to track closely with the performance of credit card companies.

American Express risk does not concern us, says Morningstar's Colin Plunkett

"A macro theme for American Express is the health of the consumer, and we've seen pretty good U.S. consumer credit," Jefferies Managing Director John Hecht told CNBC. "That should portend decent borrowing."

Nomura and other firms had also been watching something known as "provisions" for losses, the expenses for uncollected customer loans and loan payments. Those costs have been dropping in recent quarters, Carache said. In the fourth quarter, provisions for losses were up 14 percent year over year, which the company said reflected growth in the loan portfolio and higher lending write-off rates.

Citigroup, J.P. Morgan and Bank of America all said in their own quarterly reports this week that they expect consumer credit quality this year to be similar to 2018, said Christopher Donat, managing director at Sandler O'Neill & Partners. J.P. Morgan CEO Jamie Dimon said on a call with analysts that "consumers are in good shape, they're spending money."