Shares of American Express Co. (NYSE: AXP) surged in pre-market trading Friday after the credit card company reported third-quarter revenue and earnings that were higher than expected, but the rally quickly fizzled at the start of New York trading, as AXP declined with the broader U.S. stock market.

 

Q3 Earnings Summary

  • Earnings: $2.08 per share
  • Revenue: $10.99 billion

American Express soundly topped analysts’ expectations on both earnings and revenues for its most recent quarter. The company’s net income rose to $1.76 billion, or $2.08 per share, from $1.65 billion, or $1.88 per share, a year earlier. Excluding non-recurring items, American Express earned an adjusted $2.08 per share. Analysts had called for an adjusted EPS of $2.03.

Annual revenues surged 8% to $10.99 billion versus expectations of $10.94 billion. Consumer services, which account for nearly half of total revenue, jumped 11% to $5.4 billion. Revenue from commercial services increased 7% to $3.4 billion while merchant services climbed 5% to $1.7 billion.

The company set aside $879 million in provisions for losses, which is 7.6% higher than a year ago.

A report released by the Commerce Department shows Americans have increased their purchases in each of the last six months.

Management expects revenues to increase between 8% and 10% in the current quarter, chief executive Steve Squeri said during the earnings call.

“The trends we saw in the business this quarter continue to be consistent with an economy that continues to grow, albeit at a more modest pace than last year,” he said, as per The Wall Street Journal.

Company revenues have been aided by a healthy uptick in consumer spending for much of 2019. Although U.S. retail sales declined 0.3% in September, they have risen in six of the past seven months.

Receipts at retail stores are a good proxy for consumer spending, which accounts for more than two-thirds of U.S. gross domestic product (GDP). A separate gauge of personal spending released monthly by the Commerce Department shows Americans have increased their purchases in each of the last six months.

 

AXP Stock Declines

American Express’ stock surged 2.1% before Friday’s opening bell as investors rallied behind the latest earnings call. However, the gains proved unsustainable as a fresh bout of selling hit U.S. equities.

As a result, AXP closed Friday’s session down 2% at $116.76. The Dow Jones Industrial Average finished down 255.68 points, or 1%, to 26,770.20. AXP is the Dow’s 18th largest holding by weight.

At current values, American Express has a total market capitalization of $96.9 billion. The stock is up 22.5% since the start of 2019 but is down almost 10% from its 52-week high.

The company’s next earnings call is scheduled for Jan. 15-20, 2020.

 

Disclaimer: Author holds no investment position in American Express at the time of writing.