American Express ($AXP) has recently announced its second-quarter earnings, surpassing Wall Street's predictions despite a shortfall in revenue expectations. The leading payments company has raised its full-year profit outlook, reflecting gains from the sale of its fraud prevention solutions provider, Accertify.
The updated earnings per share (EPS) guidance for the year now stands at $13.30 to $13.80, an increase from the previous forecast of $12.65 to $13.15. Analysts surveyed by Capital IQ had anticipated an EPS of $12.92. Furthermore, American Express anticipates a full-year revenue growth ranging between 9% and 11%.
Earlier this year, American Express sold Accertify to private equity firm Accel-KKR, which resulted in a notable gain of $0.66 per share for the second quarter. Chief Executive Stephen Squeri commented, "Based on the strong performance of our core business, we believe we can increase our marketing investments by around 15% over last year without using any of the (Accertify) transaction gain, while still delivering exceptional earnings results this year." This insight reflects the company's confidence in its ongoing operational strength and financial health.
In terms of financial performance for the quarter ending June 30, adjusted EPS increased 21% year-over-year to $3.49, excluding the transaction gain, which was above the Capital IQ consensus of $3.26. The revenue, net of interest expenses, showed an 8% increase to $16.33 billion, though it fell short compared to Wall Street's forecast of $16.6 billion.
The revenue growth was significantly supported by increased net interest income, card member spending, and card fee growth. Despite these positive earnings announcements, American Express shares witnessed a decline of 3.9% in Friday's trading session. Breaking down the revenue streams, US consumer services revenue surged 12% to $7.73 billion, while international card services saw a 9% increase to $2.82 billion.
Additionally, the commercial services segment grew by 6%, reaching $3.95 billion, and global merchant and network services experienced a modest 1% year-over-year growth to $1.87 billion. Squeri further noted, "We continued to drive momentum across the business," highlighting a 6% growth in billings and the acquisition of 3.3 million new cards, showcasing the company’s ongoing efforts to expand its customer base and service offerings.
These metrics reflect American Express's commitment to robust growth and adaptability in a competitive financial landscape..