Third Quarter Revenue for American Express (NYSE:AXP)

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By jcameron on October 15, 2014 Street Watch

On Wednesday, October 15; American Express (NYSE:AXP) reported its 3^rd quarter earnings which showed a 10% increase in its net income to $2.9 billion during first half of 2014. The revenues collected by the company were generated in two ways. First the positive trends in the U.S market and second by the increase in the usage of card by international members. Towards the 2^nd quarter end, the spending made by the card were calculated to be more than $31,000 in international markets and about $4,100 in U.S.

There could be several factors, affecting the 3^rd quarter earnings of the company. If we study AmEx (NYSE:AXP)’s stock, we will see that the company has a core customer section in which a yearly earning of higher spending household is at least $95,000 – $100,000. The average card member, spending in the last quarter saw a year-over-year increase of 9%. In September the spending, buying inclinations of clients and the stability in their incomes reached a new high which resulted in better economy and more substantial consumer sentiment. Therefore the household income and the purchases these people make on their cards are the key factors that affect the overall earnings of the company.

There has been improvement in the factors that affect the growth of credit card companies and AmEx (NYSE:AXP) should also be able to grow and move forward due to these enhancements. In August, the second quarter consumer credit in the U.S rose to $880 billion from $875 billion. During the 3^rd quarter AmEx (NYSE:AXP) expects 4 – 5% increase in loans. AmEx (NYSE:AXP) has been successful in generating low default rates at 1% which is less than the U.S credit card industry average of 2.25%.

AmEx (NYSE:AXP) plans to take its business further through a 3^rd party, by expanding it outside of U.S. The company hopes to find international clients, and therefore AmEx (NYSE:AXP) is looking to become partners with financial services institutes through Global Network and Merchant services. These alliances then provide the clients with AmEx (NYSE:AXP) branded GNS issued cards and play the role of banks for merchants. The company had almost 42million cards by the end of the second quarter. Outside U.S, AmEx (NYSE:AXP) managed to issue about 15 million cards to consumers. The expansion of business outside U.S will definitely help AmEx (NYSE:AXP) grow as a company and will open up new doors for it.

In the second quarter, the two countries that proved to be the main catalyst in the growth of AmEx (NYSE:AXP) were China and Japan. The two countries generated 10% growth in card billed business and 8% increase in cards. FX to some extent balanced the growth and is expected to influence the progress in the 3^rd quarter, especially because of the strong U.S dollar against the Japanese yen.

These key features are certain to make an impact on the performance, revenues and the future stature of American Express (NYSE:AXP).