Amex Posts Big Profit Miss (Update) - TheStreet

Amex Posts Big Profit Miss (Update)

The credit card company said it was hit by a weakening economy and declining consumer confidence.
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Updated from 5:45 p.m. EDT.

American Express

(AXP) - Get Report

shares were falling 11% in after-hours trading after it missed analyst estimates by a wide margin and tempered its full-year outlook Monday.

The second-largest U.S. credit card company by market cap saw earnings drop 37% to 57 cents a share, from 90 cents a share a year ago. The consensus estimate of analysts polled by Thomson Reuters was 83 cents a share. The numbers lend credence to doomsayers who predict the U.S. consumer will at long last have to face up to its seemingly endless appetite for credit.

Revenue rose 8% to $7.48 billion from $6.94 billion in the second quarter of last year. Analysts had expected revenue of $7.6 billion.

American Express also said the weakening economy has led it to believe the company will no longer attain its forecast of 4% to 6% earnings growth this year. Analysts had expected a 2.9% drop in 2008 earnings to $3.29 a share vs. 2007, on average. The company said its earlier view was based on economic conditions remaining "in line with, or moderately worse than" in January. Instead, "The environment has weakened significantly since then, particularly during the month of June," the company said.

"The scope of the economic fallout was evident even among our longer term, superprime cardmembers," Chairman and CEO Kenneth Chenault said in a company statement. "Newer Cardmembers -- whose write-off levels are typically higher than the total portfolio -- are also feeling the impact, but we are confident that the relationships we've built during the last several years will generate attractive economics over their life cycle.

The company's U.S. Card Segment reported an increase in provisions for losses to $1.5 billion, up from $640 million a year ago. The spike was due to a $600 million before-tax addition to U.S. lending credit reserves, increased write-off and delinquency rates and also the higher level of loans and business volumes compared to the year-ago period.

American Express is the second of the big four credit card companies to report results, following

Discover Financial Services

(DFS) - Get Report

, which narrowly beat estimates at the start of the month.

Visa

(V) - Get Report

and

MasterCard

(MA) - Get Report

report July 30 and 31, respectively.

American Express shares were falling 11% to $36.40 in recent after-hours action.