American Express Company (AXP) Dives Deeply on Weak Earnings

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The shares of American Express Company (NYSE:AXP) suffered the biggest decline in seven years after reporting weak financial results for the fourth quarter of 2015.

The stock price of the credit card company plummeted 12% to $55.12 per share around 2:01 in the afternoon in New York. Earlier today, the stock was down to as low as $54.14 per share.

American Express lost more than 34% in stock value over the past year. The credit card company’s stock value was down nearly 20% over the past month.  Today, it recorded the biggest intraday decline since April 2009, and the worst performance in the Dow Jones Industrial Average (DJIA) as noted by Bloomberg.

“There is still further downside to go. We continue to believe revenue growth will be tough to attain in the current competitive environment,” wrote Jason Arnold, an analyst RBC Capital Markets, in a note to investors.

American Express 4Q financial performance

American Express reported that its net income declined 38% from $1.44 billion to 899 billion in the fourth quarter. Its earnings attributable to common shareholders dropped 36% from $1.39 per share to $0.89 per share.

According to the company, its revenue was $8.39 billion, down by 8% from $9.08 billion in the same quarter a year earlier. Its return on average equity fell from 29.1% to 24%.

American Express explained that its fourth-quarter financial results included a $419 million charge ($335 million after-tax) for impairment of goodwill and technology assets, in addition to restructuring costs within the Enterprise Growth (EG) Group.

The credit card company said the appreciation U.S. dollar negatively impacted its earnings, revenues, and expenses. The declining oil prices and the stronger competition in the financial industry also contributed to the company’s poor performance last year.

American Express generated a net income of $.1 billion or $5.05 in earning per share and $32.8 billion in revenue for the full fiscal 2015.

During a conference call with analysts on Thursday, CEO Ken Chenault said, “Let me acknowledge that the performance we’re discussing today is not what we or you or I are accustomed to seeing from American Express. We recognize that we are operating in a new reality.”

American Express outlook

American Express plans to implement another restructuring to reduce costs by $1 billion by the end of 2017.  Chanault also clarified that the company will continue to make investments to attract customers.

Looking forward, American Express expected to achieve earnings of around $5.40 to $5.70 per share for the fiscal 2016.

For the fiscal 2017, the credit card company is targeting to generate earnings of at least $5.60 per shate.

“We have a great set of assets to draw upon, including a trusted brand, financial strength, an integrated business model, world class service and a history of innovation. We’re confident that we’ll not just deal with our near-term challenges, but return to growth and position the company for long-term success,” said Chenault in a statement.