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American Express Posts Strong Fourth Quarter

The finance and travel company sees earnings jump 18%.

American Express


saw fourth-quarter earnings shoot up almost 18% over last year, boosted by balanced growth in the company's charge card and travel services divisions.

The company, sometimes viewed as a gauge of U.S. business activity, depicted its customers as spending briskly on everything from travel to entertainment in the quarter, although it said a slight increase in charges for quotidian items like groceries hurt the card division's profitability slightly.

The New York-based


component earned $896 million, or 71 cents a share, in the quarter, compared with earnings of $763 million, or 59 cents a share, last year. The 2004 quarter included a charge of $102 million related primarily to the restructuring of its business travel line and an offsetting gain of $117 million from the sale of a leasing operation.

Revenue rose 10% from last year to $7.77 billion, reflecting a 16% jump in charge card revenue to $2.82 billion, a 16% jump in card-related commissions and fees to $616 million, and a 9% jump in travel revenue to $484 million. The top line also included $325 million in income from receivables securitizations, up 11% from last year.

"Card member spending and transaction levels were exceptionally strong in the fourth quarter,'' the company said. "Spending during the holiday shopping period on American Express cards was the best it has ever been.''

Using a different revenue breakdown, travel-related services sales rose 11% from last year to $5.79 billion, while American Express Financial Advisors sales rose 8.5% to $1.86 billion.

Analysts surveyed by Thomson First Call had been forecasting earnings of 70 cents a share on revenue of $7.50 billion. The stock rose 66 cents, or 1.3%, to $52.59 at midday. It's down 10% this year after rising about 18% in 2004.

"Record levels of card member spending along with higher client asset levels generated double-digit revenue growth throughout the year," American Express said. "Credit quality remained excellent and reengineering efforts helped to contain our expenses."

The provision set aside in the fourth quarter for losses and claims in its card division fell by 3% to $566 million.

American Express has been plowing money into advertising for almost two years, with marketing, promotion, rewards and card member expenses rising 24% in the latest quarter from last year.

Still, the company's return on average total stockholders equity was 22% in the 2004 fourth quarter, compared with 20.6% a year ago.