American Express Company (NYSE:AXP) shares popped about 5% following a better-than-expected financial performance in the third quarter of fiscal 2016. The firm reported $1.24 in earnings per share (EPS), beating Street expectations by 28 cents. Revenue plunged 5.1% year-over-year (YoY) despite beating Street expectations by reporting $7.8 billion.
According to CEO, Kenneth I. Chenault, it was able to keep ahead of its FY16 financial outlook provided at the starting of the year using its credit quality and strong operating discipline. For 5% YoY revenue decline, he stated: “While reported revenues were down 5 percent, we saw underlying revenue growth of 5 percent after adjusting for the absence of Costco-related business this quarter – slightly faster than comparable second-quarter levels.” He further added that adjusted loan observed high growth while adjusted billed business rose 7% YoY. Its net card fees also surged about 10% YoY, indicating healthy performance across its premium cards portfolio.
The US consumer services segment observed 26% YoY decline in revenue, while its International consumer and network services segment revenue rose 1% YoY. Revenues in Global commercial services remained flat, compared to 3QFY15.
Street analysts added that the New York-based company stated it would pursue various initiatives aggressively in 4Q. It would carry out an extensive advertising campaign and enhance emphasis on platinum card. The company further stated that its results had provided it with a renewed confidence to pump up investments during the upcoming holiday shopping season.
The bank boosted its FY16 adjusted EPS guidance and expects it in $5.9-6 range, excluding restructuring charges undertaken in first three-quarters of the year. The previously stated range was $5.4-5.7, while the Street anticipates $5.51 EPS for the year.
Of the total 32 Street analysts, six rated it Buy, three held Overweight, 18 recommended Hold, and two advocated Underweight, while three rated it Sell. The analysts also gave a mean price target of $67.46, with 10.14% upside potential factored in, above the last close.