American Express Earnings Jump 10%

  • American Express reports first-quarter earnings per share of $1.07.
  • Analysts were expecting EPS of a dollar.
  • Total revenue grows 8% year-over-year.

NEW YORK ( TheStreet) - American Express ( AXP) on Wednesday reported a 10% year-over-year increase in earnings, and an 9% increase in revenue, net of interest expense.

The company reported first-quarter net income of $1.26 billion, or $1.07 a share, increasing from $1.19 billion, or $1.01 a share, during the fourth quarter, and $1.18 billion, or 97 cents a share, during the first quarter of 2011.

The first-quarter earnings came in ahead of the one dollar EPS estimate among analysts polled by Thomson Reuters.

Total first-quarter revenues, net of interest expense, were $$7.61 billion, compared to $7.74 billion the previous quarter, and $7.03 billion a year earlier. First-quarter revenues came in ahead of the consensus estimate of $7.57 billion.

The company's first-quarter provision for loan losses totaled $412 million, increasing from $409 million the previous quarter, and $97 million a year earlier, reflecting "a larger lending reserve release in the year ago period, partially offset by lower net write-offs in the current quarter. Credit quality continued to be at historically strong levels."

CEO Kenneth Chenault said that "Higher cardmember spending, excellent credit metrics and disciplined expense management helped us to start 2012 with record first-quarter earnings and revenues."

For the company's U.S. Card Services division, first-quarter net income was $752 million, increasing from $727 million in the fourth quarter, and from $555 million in the first quarter of 2011. Total expenses in the U.S. Card division declined by 4% year-over-year, which included a 10% decline in salaries and employee expenses, "primarily reflecting higher restructuring and other reengineering costs in the year-ago period."

For the International Card Services division, American Express reported first-quarter net income of $197 million, increasing from $152 million the previous quarter, and $189 million a year earlier.

Global Commercial Services net income during the first quarter was $177 million, declining from $180 million in the fourth quarter and $184 million in the first quarter of 2011.

Global Network and Merchant Services net income increased to $357 million during the first quarter, from $324 million the previous quarter, and $313 million a year earlier.

American Express reported "corporate and other" losses of $227 million during the first quarter, compared to a loss of $191 million the previous quarter and net income of $64 million a year earlier, with the first-quarter 2011 results having "included income of $220 million ($136 million after-tax) for the previously announced MasterCard and Visa settlements."

The company's first-quarter return on average equity was a strong 27.1%, although the ROE declined from 27.7% in the fourth quarter, and 27.9% during the first quarter of 2011.

American Express's shares closed at $58.04 Tuesday, returning 24% year-to-date.

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The shares trade for 12 times the consensus 2013 EPS estimate of $4.77. The consensus 2012 EPS estimate is $4.25.

The company plans to "repurchase as much as $4 billion of outstanding shares this year and an additional $1 billion in the first quarter of 2013," according to Chenault."

Based on American Express's 20-cent quarterly payout, the shares have a dividend yield of 1.38%..

Interested in more on American Express? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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