Home » Drugs » Fosamax »

American Express net tops estimates

Oct 24, 2007 | Staff | Chicago Tribune

American Express Co. said Monday that higher spending by cardholders pushed third-quarter profit up more than 10 percent.

The credit card brand, known for its relatively wealthy customer base, reported earnings of $1.07 billion, or 90 cents a share, topping estimates by 5 cents a share, according to Thomson Financial. A year ago, the New York-based firm earned $967 million, or 79 cents a share. Revenue rose 11 percent, to $6.95 billion.

"Our strong earnings growth this quarter reflected a 16 percent rise in combined spending by consumers, small businesses and corporate cardmembers," said Chairman and Chief Executive Kenneth Chenault, who added that the company continues "to be cautious about the overall economy."

That 16 percent increase boosted purchases to $162.5 billion. American Express also said loans to cardholders grew 23 percent, to $72 billion.

"It really is a challenging environment for financials across the board, but I don't expect that American Express is going to be one that is going to show tremendous slowdown in growth," said Patrick Schumann, an analyst at Edward Jones & Co. in Des Peres, Mo. "Their card members are typically the higher-spend and upper-income type of folks."

American Express' cardholder loans are growing as much as four times faster than competitors, as it offers more cards with revolving balances and reward programs, said Michael Taiano, an analyst at Sandler O'Neill & Partners in New York. The growth in its loan portfolio has "unnerved" some investors concerned about defaults, he said before the release.

Provisions for losses in the U.S. surged 44 percent from what the company called "unusually" low levels a year earlier, when the after-effects of a new bankruptcy law cut bad debts.

The report came out after the close of trading.

In other earnings news:

- Merck & Co. posted a 63 percent increase in its third-quarter profit and boosted its full-year earnings forecast.

The Whitehouse Station, N.J.-based maker of osteoporosis treatment Fosamax and Singulair for asthma and allergies reported net income of $1.53 billion, or 70 cents a share, up from $940.6 million, or 43 cents a share, a year earlier. Revenue climbed 12 percent, to $6.07 billion.

Excluding a charge for an acquisition and a gain from a patent settlement, net income would have been 75 cents a share. On that basis, analysts were expecting 69 cents a share, according to Thomson Financial. Sales were led by Singulair, at $1 billion; the blood-pressure medicines Cozaar and Hyzaar, at $814 million; and Fosamax, at $725 million.

Merck added $70 million to its reserves for defending lawsuits over the blockbuster painkiller Vioxx it pulled from the market three years ago. To date, it has reserved a total of $1.9 billion for legal expenses. It said it faces about 26,600 lawsuits representing 47,000 plaintiffs, and about 265 potential class-action cases.

Merck stock added $1.53, to $54.64, on the New York Stock Exchange.