America Express was down about 6% to about $72 after posting Q3 earnings that were down 11% per share. Analysts had apparently expected a smaller decline.
I am not exactly shocked by the 11% decline given that one third of its revenues come from outside the U.S. and given the sharply higher U.S. dollar. Also we know it lost the Costco card in Canada.
The company had said earnings would be flat to down in 2015. Given that earnings were up in the first half of the year this was an indication they would be down in the last half of the year. The company also indicated it was ramping up certain marketing expenses. In my own report I should have focused on that.
I did say:
“The short term outlook is negative as the company grapples with the loss of its large Costco co-brand business in early 2016 and ramps up marketing expenses in 2015 to attempt to replace that business and also due to the negative impact of the higher U.S. dollar.”
I had noted in my October 13 post that I have an order in to add to my position if it falls to $70.10.
Overall I don’t think it was the company that “missed expectations” in Q3, rather it was the analysts who “missed” the guidance that Amex had provided. Analyst predict earnings but no company is obliged to target to meet those external expectations. To say that a company missed analyst expectations is like saying the Weather missed the forecast rather than the other way around.
American Express, perhaps like the weather, is becoming somewhat harder to predict.