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AmEx Rewards Costs Climb to Record as It Rolls Out New Cards

Elizabeth Rembert and Jenny Surane
(Bloomberg) -- American Express Co. is learning how expensive it is to keep an airline happy.AmEx has been focused on rolling out new cards with many of its larger co-brand partners, and renewed its deal with its largest one, Delta Air Lines Inc., in April. That helped push spending on cardholder rewards to a record $2.65 billion in the second quarter, topping the $2.64 billion average of analysts’ estimates.Key InsightsThe firm’s discount revenue -- the fees it collects from merchants each time a consumer swipes a card at checkout -- climbed 6% to $6.58 billion, falling short of analyst projections.The firm left its profit forecast for the year unchanged at $7.85 to $8.35 a share, and reaffirmed its projection that revenue will grow 8% to 10%. The company expects profit to be more in line with the middle of that guidance range, it said on a conference call.Customer spending on the firm’s cards swelled 5% to $311.7 billion in the second quarter, below the $317.2 billion average estimate. “This spending is occurring against the backdrop of an economy that is growing at a steady, but modest pace relative to 2018,” Chief Executive Officer Stephen Squeri said in the statement.Market ReactionShares slipped 0.8% to $127.36 at 9:32 a.m. in New York. They gained 33% this year through Thursday, outpacing the 18% increase in the S&P 500 Financials Index.What Bloomberg Intelligence Says“American Express revenue may rise 7-8% long term, our scenario analysis shows, driven by high-spending U.S. consumers and the ability to use its position as the dominant business-card issuer to boost B2B payments." David Ritter, financials analystClick here to read the research.Get MoreRead the full statement here.(Adds comment on guidance in third bullet point, updates share performance.)To contact the reporters on this story: Elizabeth Rembert in New York at erembert@bloomberg.net;Jenny Surane in New York at jsurane4@bloomberg.netTo contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steve Dickson, Daniel TaubFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

(Bloomberg) -- American Express Co. is learning how expensive it is to keep an airline happy.

AmEx has been focused on rolling out new cards with many of its larger co-brand partners, and renewed its deal with its largest one, Delta Air Lines Inc., in April. That helped push spending on cardholder rewards to a record $2.65 billion in the second quarter, topping the $2.64 billion average of analysts’ estimates.

Key Insights

The firm’s discount revenue -- the fees it collects from merchants each time a consumer swipes a card at checkout -- climbed 6% to $6.58 billion, falling short of analyst projections.The firm left its profit forecast for the year unchanged at $7.85 to $8.35 a share, and reaffirmed its projection that revenue will grow 8% to 10%. The company expects profit to be more in line with the middle of that guidance range, it said on a conference call.Customer spending on the firm’s cards swelled 5% to $311.7 billion in the second quarter, below the $317.2 billion average estimate. “This spending is occurring against the backdrop of an economy that is growing at a steady, but modest pace relative to 2018,” Chief Executive Officer Stephen Squeri said in the statement.

Market Reaction

Shares slipped 0.8% to $127.36 at 9:32 a.m. in New York. They gained 33% this year through Thursday, outpacing the 18% increase in the S&P 500 Financials Index.

What Bloomberg Intelligence Says

“American Express revenue may rise 7-8% long term, our scenario analysis shows, driven by high-spending U.S. consumers and the ability to use its position as the dominant business-card issuer to boost B2B payments." David Ritter, financials analystClick here to read the research.

Get More

Read the full statement here.

(Adds comment on guidance in third bullet point, updates share performance.)

To contact the reporters on this story: Elizabeth Rembert in New York at erembert@bloomberg.net;Jenny Surane in New York at jsurane4@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steve Dickson, Daniel Taub

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.