NEW YORK—American Express reported a 16 percent drop in profits from a year earlier, missing analysts’ estimates, as the credit card company was hurt by higher expenses and remains under pressure from the strong U.S. dollar. The company also cut its full-year forecast.
AmEx said Wednesday that it earned $1.23 billion in the third quarter after payments to preferred shareholders, down from $1.466 billion in the same period a year earlier. On a per-share basis, the company earned $1.24 per share compared with $1.40 a share a year earlier.
The results fell short of Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of $1.31 per share.
American Express has faced significant challenges all year following the fallout from its announced breakup with Costco, the company’s largest co-branded credit card program, and the strong U.S. dollar, which makes any revenue earned abroad worth less once brought back to the U.S.
“Against the backdrop of a challenging environment and an uneven global economy, we continued to move forward with initiatives to build our business for the years ahead,” said Kenneth Chenault, American Express’ chairman and CEO, in a prepared statement.
AmEx had revenue of $8.19 billion in the quarter, down from $8.3 billion a year earlier. That result also missed analysts’ estimates.
AmEx came under pressure on several fronts. American Express customers spent $258.9 billion on their cards in the quarter, a key measure of the company’s health, which was effectively flat from the year before. U.S. card spending rose, but outside the U.S. card spending fell — partly as a result of the strong dollar.
The company had noticeably higher expenses in the quarter, $5.73 billion from $5.57 billion a year earlier, as the company spent more to retain customers. AmEx executives previously have said the company would see higher expenses this year because the company is trying to retain the customers who might leave once the Costco card deal ends early next year.
American Express also gave a weak full-year outlook, citing higher expenses and stronger dollar. The company said it expects to earn between $5.20 and $5.35 per share. Previously, the company had said earnings would be “flat to modestly down” from last year’s $5.56 per share. Analysts were looking for AmEx to forecast $5.49 a share, according to Zacks.
American Express shares fell 3 percent in after-market trading to $74.40. The company’s shares are down nearly 18 percent this year.