Earnings Preview: American Express 4Q earnings

American Express expected to elaborate on cardholders' 4Q spending trends

Associated Press

LOS ANGELES (AP) -- American Express Co. is expected to report a 46 percent drop in earnings for the fourth quarter, reflecting more than $590 million in after-tax charges, most as a result of a restructuring plan aimed at making its business more online-friendly. The New York credit card company will report its results after the stock markets close on Thursday.

WHAT TO WATCH FOR: American Express issued preliminary results for the October-December quarter last week, noting that spending by cardholders jumped 8 percent during the quarter, even after Superstorm Sandy hurt some spending.

But investors will want to get more specifics on cardholders' spending and payment trends during the quarter, including whether spending is showing any signs of slowing this year now that many U.S. consumers are faced with higher taxes.

New Year's Day legislation increased income tax rates on the country's top earners and boosted payroll taxes for most working Americans. That has raised some concern that consumers might pull back on their spending, which drives about 70 percent of U.S. economic activity.

Still, American Express cardholders tend to be more affluent than other credit card users, and the company has done well in the slow, bumpy recovery from the recession.

Management told analysts last week that the company was generally pleased with holiday spending, both in the U.S. and overseas. American Express noted that credit card authorization volume surpassed prior single-day volumes 12 times during the quarter.

Wall Street also will be looking for more details on American Express' restructuring plan, which involves 5,400 job cuts, mostly in the company's travel business.

The plan aims to put the company in better position to cater to customers who increasingly turn to online and mobile devices to shop, pay bills and make travel plans.

American Express anticipates that the shift to a more online-friendly operation will enable it to serve more customers with fewer employees, thereby reducing its expenses.

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 $1.05 per share on revenue of $8.10 billion, according to FactSet. American Express has said that, excluding one-time charges, it anticipates earnings of $1.09 per share on revenue of $8.10 billion.

LAST YEAR'S QUARTER: American Express earned $1.19 billion, or $1.01 per share, on revenue of $7.74 billion.

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