American Express Reports First-Quarter Earnings Per Share of $1.80, Adjusted EPS of $2.011

Revenue Growth Reflects Higher Card Member Spending, Loans and Card Fees

Company Affirms 2019 Outlook

American Express Company (NYSE: AXP) today reported first-quarter net income of $1,550 million or $1.80 per share, compared with net income of $1,634 million or $1.86 per share a year ago.

 

(Millions, except percentages and per share amounts)

 
 

Quarters Ended
March 31,

 

Percentage
Inc/(Dec)

      2019     2018  
Total Revenues Net of Interest Expense   $ 10,364   $ 9,718   7
Net Income   $ 1,550   $ 1,634   (5)

Diluted Earnings Per Common Share2

  $ 1.80   $ 1.86   (3)

Adjusted Diluted Earnings Per Common Share1

  $ 2.01   $ 1.86   8
Average Diluted Common Shares Outstanding     843     861   (2)
 

First-quarter earnings per share of $1.80 included an addition to legal reserves of $0.21 per share related to a merchant litigation that has now been resolved. Excluding that litigation-related charge, adjusted earnings per share for the quarter was $2.01.1

First-quarter consolidated total revenues net of interest expense were $10.4 billion, up 7 percent from $9.7 billion a year ago. Excluding the impact of foreign exchange rates, adjusted revenues net of interest expense grew 9 percent.3 The increases were broad-based and reflected higher Card Member spending, loan volumes and fee income.

Consolidated provisions for losses were $809 million, up 4 percent from $775 million a year ago. The increase reflected continued growth in the loan and receivable portfolios and higher net lending write-offs, partially offset by a smaller reserve build compared to a year ago.

Consolidated expenses were $7.6 billion, up 11 percent from $6.9 billion a year ago. The increase reflected, in part, higher customer engagement costs. Operating expenses were up 10 percent from a year ago,4 primarily driven by the litigation-related charge.

The consolidated effective tax rate was 20.8 percent, down from 21.5 percent a year ago.

“With FX-adjusted revenues up 9 percent we are off to a solid start in 2019,” said Stephen J. Squeri, chairman and chief executive officer. “This growth was broad based and well-balanced across spend, lend and fee revenues, reflecting the benefits of our integrated business model.

“We continued to expand our merchant network and added 3.1 million new proprietary cards in the quarter driven primarily by our digital acquisition initiatives. Billings growth remained solid across customer segments and geographies, with strong performance internationally, especially among consumers, small and mid-sized business customers. Loan growth continued to be strong, and credit quality remained at industry-leading levels.

“During the quarter, we signed an extension of our partnership with Delta Air Lines that will take us to 2030. Delta is our largest cobrand partnership, and it’s one of the most valuable portfolios in the industry. Spending on our Delta cobrand products has grown by double digits annually for the past several years, and together we’ve acquired more than 1 million new accounts in each of the past two years. The partnership contributes significant revenue and earnings to both companies and, from a customer and shareholder perspective, we feel great about the opportunity it represents.

“We are affirming our revenue and EPS guidance for the full year.5

“Looking ahead, we continue to see a number of attractive growth opportunities across our businesses, and we’re going to invest to take advantage of those opportunities in order to drive revenue growth over the moderate to longer term.”

Global Consumer Services Group reported first-quarter net income of $821 million, down 1 percent from $826 million a year ago.

Total revenues net of interest expense were $5.6 billion, up 9 percent from $5.1 billion a year ago. The rise primarily reflected higher loan volumes, Card Member spending and fee income.

Provisions for losses totaled $552 million, up 4 percent from $530 million a year ago. The rise primarily reflected continued growth in the loan portfolio and higher net lending write-offs, partially offset by a smaller reserve build compared to a year ago.

Total expenses were $4.0 billion, up 12 percent from $3.5 billion a year ago. The increase was primarily driven by higher customer engagement costs.

The effective tax rate was 21 percent, unchanged from a year ago.

Global Commercial Services reported first-quarter net income of $586 million, up 7 percent from $546 million a year ago.

Total revenues net of interest expense were $3.2 billion, up 6 percent from $3.0 billion a year ago. The increase primarily reflected higher Card Member spending.

Provisions for losses totaled $254 million, up 6 percent from $240 million a year ago.

Total expenses were $2.2 billion, up 7 percent from $2.1 billion a year ago. The rise primarily reflected higher marketing and business development costs and increased operating expenses.

The effective tax rate was 21 percent, down from 23 percent a year ago.

Global Merchant and Network Services reported first-quarter net income of $631 million, up 22 percent from $516 million a year ago.

Total revenues net of interest expense were $1.6 billion, unchanged from a year ago.

Total expenses were $787 million, down 11 percent from $887 million a year ago, primarily due to a charge related to the sale of the company’s prepaid operations in the prior year.

The effective tax rate was 25 percent, down from 27 percent a year ago.

Corporate and Other reported first-quarter net loss of $489 million, compared with a net loss of $254 million a year ago, primarily reflecting the impact of the litigation-related charge mentioned earlier.

About American Express

American Express is a globally integrated payments company, providing customers with access to products, insights and experiences that enrich lives and build business success. Learn more at americanexpress.com and connect with us on facebook.com/americanexpress, instagram.com/americanexpress, linkedin.com/company/american-express, twitter.com/americanexpress, and youtube.com/americanexpress.

Key links to products, services and corporate responsibility information: charge and credit cards, business credit cards, travel services, gift cards, prepaid cards, merchant services, Accertify, InAuth, corporate card, business travel, and corporate responsibility.

This earnings release should be read in conjunction with the company’s statistical tables for the first-quarter 2019, available on the American Express website at http://ir.americanexpress.com and in a Form 8-K filed today with the Securities and Exchange Commission.

An investor conference call will be held at 8:30 a.m. (ET) today to discuss first-quarter earnings results. Live audio and presentation slides for the investor conference call will be available to the general public on the above-mentioned American Express Investor Relations website. A replay of the conference call will be available later today at the same website address.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. The forward-looking statements, which address American Express Company’s current expectations regarding business and financial performance, including management’s outlook for 2019, among other matters, contain words such as “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely” and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company undertakes no obligation to update or revise any forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements, include, but are not limited to, the following:

A further description of these uncertainties and other risks can be found in American Express Company’s Annual Report on Form 10-K for the year ended December 31, 2018, the company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 and the company’s other reports filed with the Securities and Exchange Commission.

 
American Express Company
Appendix I
Reconciliations of Adjustments
 
     
Q1'19 Q1’18

Percentage
Inc/(Dec)

Diluted earnings per common share $1.80 $1.86

(3)

Litigation-related charge (pre-tax) 0.27
Tax impact of litigation-related charge (0.06)
Net Impact of Q1’19 litigation-related charge 0.21
Adjusted diluted earnings per common share $2.01 $1.86 8
 
 
  2019 EPS Range
GAAP EPS Outlook $7.64   $8.14
Litigation-related charge (pre-tax) 0.27 0.27
Tax impact of litigation-related charge (0.06) (0.06)
Net Impact of Q1’19 litigation-related charge 0.21 0.21
Adjusted EPS Outlook $7.85 $8.35
 
_______________________________

Notes:

1 Adjusted diluted earnings per common share (EPS), a non-GAAP measure, excludes the impact of a litigation-related charge in Q1 ‘19. Management believes adjusted EPS is useful in evaluating the ongoing operating performance of the company. See Appendix I for a reconciliation to EPS on a GAAP basis.

2 Earnings per common share – diluted was reduced by the impact of (i) earnings allocated to participating share awards and other items of $11 million and $13 million for the three months ended March 31, 2019 and 2018, respectively, and (ii) dividends on preferred shares of $21 million for both the three months ended March 31, 2019 and 2018.

3 As reported in this release, FX-adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translations into U.S. dollars (e.g., assumes the foreign exchange rates used to determine results for the three months ended March 31, 2019 apply to the period(s) against which such results are being compared). Management believes the presentation of information on an FX-adjusted basis is helpful to investors by making it easier to compare the company’s performance in one period to that of another period without the variability caused by fluctuations in currency exchange rates.
4 Operating expenses represent salaries and employee benefits, professional services, occupancy and equipment, and other expenses.
5 The company’s 2019 revenue growth guidance remains 8-10 percent. The company’s 2019 EPS guidance on a GAAP basis, which includes the impact of a litigation-related charge in Q1’19, is between $7.64 and $8.14. The 2019 adjusted EPS guidance, a non-GAAP measure, remains between $7.85 and $8.35. See Appendix I for a reconciliation. Management believes the presentation of adjusted EPS guidance is useful in evaluating the ongoing operating performance of the company.

Media Contact:
Marina H. Norville, marina.h.norville@aexp.com, +1.212.640.2832

Investors/Analysts Contacts:
Edmund Reese, edmund.reese@aexp.com, +1.212.640.5574
Melanie L. Michel, melanie.l.michel@aexp.com, +1.212.640.5574