American Express Says First-Quarter Profits to Slip

American Express (AXP Quote) said Monday it expects its first-quarter earnings per share to be about 18% below the 48 cents it earned in the same period a year ago, reflecting pretax losses of about $185 million from the write down and sale of high-yield securities in the investment portfolio of its subsidiary, American Express Financial Advisors. In the same period a year ago, the company reported writedowns of $18 million.

The company also said that because of the continued decline in the equity markets with no sign of a pickup in economic activity or spending by corporate customers, earnings growth for the full year is likely to be lower than forecast. Earlier this year, American Express said growth would be at the low end of a previously announced range of 12% to 15% range.

Seventeen analysts surveyed by Thomson Financial/First Call were expecting earnings of 51 cents a share for the quarter and $2.27 a share for the full year. In a statement, the company said that excluding losses in the high-yield sector, first-quarter earnings per share are expected to be at about the same as last year's.

The company said its high-yield portfolio deteriorated in the latter part of 2000, and writedowns in the fourth quarter of last year totaled $49 million. Earlier this year, American Express indicated that a persistent weakness in the high-yield market would have a negative impact on earnings, particularly in the early part of 2001.

While first-quarter earnings at the AmEx travel related services unit are expected to increase 13% to 15%, first-quarter earnings of the financial advisors unit will be down about 80%.

The company said earlier this year that 2001 quarterly earning results would be uneven from quarter to quarter, and that the pressure on earnings would be most pronounced during the first half of 2001, especially at its financial advisors unit. The outlook was also based in part on re-engineering plans designed to generate at least $500 million of expense savings, mainly in the second half of this year.

Final results for the first quarter are expected to be announced April 23.

Shares of American Express were down $3.48, or 8.4%, to $37.82 in preopen Instinet trading.