Earnings Preview: American Express 1Q earnings

American Express expected to post improved 1st-quarter earnings on card loan growth

Associated Press

LOS ANGELES (AP) -- American Express Co. is expected to report improved earnings and revenue for the first quarter, aided by growth in card loans. The New York credit card company's latest results, due after the stock markets close on Wednesday, also should give investors insight on consumers' spending trends.

WHAT TO WATCH FOR: How cardholders' spending and payment trends fared during the quarter, as well as an update on the company's efforts to restructure its travel business to make it more online-friendly.

Traditionally, credit card spending slows in the first three months of the year as consumers focus on paying down cards after going on a spending spree during the holiday season.

Sales at U.S. retailers declined a seasonally adjusted 0.4 percent in March. That followed a 1 percent gain in February and a 0.1 percent decline in January.

Some of that decline may be due to an increase in Social Security payroll taxes that went into effect in January and has cut into many Americans' paychecks.

Even so, American Express cardholders tend to be more affluent than other credit card users, which was one reason the company has done well in the slow, bumpy recovery from the recession.

In the fourth quarter, management said spending growth by cardholders continued to be healthy, despite an uneven economy.

In a research note last week, Barclays analyst Mark DeVries said he anticipates American Express' global billed business slowed to 5.5 percent growth in the first quarter, compared with growth of 7.5 percent in the previous quarter.

Still, the analyst projects card loans grew 4 percent to $62.5 billion.

DeVries also forecast that American Express' card delinquency rate, or the rate at which cards were unpaid for at least 30 days, will be flat compared with the previous quarter.

Investors will be listening for the latest word on how American Express' restructuring plan is going. The plan, announced in January, called for eliminating 5,400 jobs, mostly in the company's travel business.

American Express aims to improve how it caters to customers who increasingly turn to online and mobile devices to shop, pay bills and make travel plans.

WHY IT MATTERS: American Express is one of the world's largest credit card companies. The health of its business provides a picture of the health of the affluent consumer. That's important because according to Citi Research, high-income consumers account for about half of all spending in the U.S.

WHAT'S EXPECTED: Analysts, on average, expect adjusted earnings of $1.12 per share on revenue of $8.01 billion, according to FactSet.

LAST YEAR'S QUARTER: American Express earned $1.25 billion, or $1.07 per share, on revenue of $7.6 billion.

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