American Express expected to post improved 3rd-qtr earnings, revenue

LOS ANGELES, Calif. – American Express Co.’s latest quarterly report may give investors insight on how consumers’ spending and debt-management trends are faring heading into the December holiday shopping season. The credit card company is expected to report improved earnings and revenue for the third quarter after the stock markets close on Wednesday.

WHAT TO WATCH FOR: How cardholders’ spending and payment trends fared during the quarter, as well as an update on the company’s plans to form a joint venture to operate its global business travel division.

American Express cardholders tend to be more affluent than other credit card users, which is one reason the company has done well as the nation’s economy has gradually improved since the recession.

The U.S. economy improved steadily, if sluggishly this year in advance of the partial government shutdown.

Between January and August, the most recent figures available, the economy added an average of 180,250 jobs a month. Unemployment, meanwhile, was 7.3 per cent in August, down from 7.9 per cent in January.

The gradually improving job picture could help boost consumer spending during the coming holiday season — traditionally good news for card issuers.

Unlike Visa and MasterCard, which only process transactions, American Express issues its own cards. When cardholders charge more on their Amex cards, the company earns even more in interest income and a variety of fees.

American Express saw cardholder spending grow 7 per cent in the second quarter. That helped lift the card issuer’s earnings 5 per cent for the quarter.

Investors also will be listening Wednesday for an update on American Express’ proposed joint venture with an investor group led by Certares International Bank.

Under the terms of the proposed deal, announced in September, American Express would sell half of its business-travel division to the investor group and create a joint venture that would be run by a separate board with representatives from American Express, the investor group and independent directors.

The investor group would inject $700 million to $1 billion into the joint venture, which would keep the American Express Global Business Travel name. The card company’s consumer-travel business would not be included in the deal.

Earlier this year, American Express announced a restructuring plan that called for cutting 5,400 jobs, mostly in travel services. While its card holders have been charging more, the business-travel segment has been squeezed as companies ask employees to make travel arrangements online.

WHY IT MATTERS: American Express is one of the world’s largest credit card companies. The health of its business provides a picture of the health of the affluent consumer. That’s important because, according to Citi Research, high-income consumers account for about half of all spending in the U.S.

WHAT’S EXPECTED: Analysts, on average, expect adjusted earnings of $1.22 per share on revenue of $8.2 billion, according to FactSet.

LAST YEAR’S QUARTER: American Express earned $1.25 billion, or $1.09 per share, on revenue of $7.86 billion.