American Express Shares Drop On Weak Q2 Revenue, Fears Of Processing Fees

After the bell Wednesday, American Express AXP reported second quarter results that disappointed investors. Earnings per share were better than expected but weak revenue tempered any optimism and shares fell slightly after trading with high volatility during the day.

Second Quarter Highlights

For the second quarter of 2013, American Express reported earnings per share of $0.53 vs. $0.46 expected, a solid beat of 15.22 percent. Earnings per share rose 10.43 percent from a year ago.

“We generated record bottom line results this quarter despite an uneven global economy,” said Kenneth I. Chenault, chairman and chief executive officer. “Cardmember spending grew by 7 percent (8 percent adjusted for foreign currency translations), with broad-based gains throughout the business both here in the U.S. and internationally. We continued to build our cardmember loan portfolio while maintaining credit indicators at historically strong levels."

Revenues in the quarter were reported at $8.24 billion, missing analyst forecasts of $8.3 billion by 0.72 percent despite posting a year-over-year gain.

"We are well on track with the restructuring and related initiatives that we announced earlier this year," continued Chenault. "They are helping us contain expense growth and that, in turn, is giving us the flexibility to make substantial investments designed to grow the business and expand into newer segments of the market."

“We continue to believe that maintaining a lean operating structure will be a critical component of delivering shareholder value in the current environment."

European Fee Fears

Fears circulated earlier Wednesday over a draft proposal from the European Union to place a cap on credit card processing fees, a move which could crimp profits from the firm. However, the company issued a statement earlier today in an attempt to quell fears and saw the stock bounce on the news.

"Our proprietary consumer and corporate card businesses are not covered by the proposed pricing caps. Three-party systems, such as American Express, would only be covered when they license other institutions to issue cards, as in our Global Network Services Business. GNS represents a relatively small percentage of our European business."

Shares Slide

American Express shares slid to new after-hours lows of $75.60 after closing above $76.50, declining 1.43 percent after-hours after closing down 1.88 percent.