American Express Co. fell the most in the Dow Jones Industrial Average after third-quarter profit missed analysts’ estimates and the card issuer said earnings per share will probably decline as much as 6.5 percent this year.
AmEx slumped 5.6 percent to $72.22 at 9:38 a.m. in New York, the most intraday since Aug. 24. The shares have declined 22 percent this year, compared with the 3 percent retreat of the 30-company Dow, as Chief Executive Officer Ken Chenault struggles to overcome the departure of its biggest co-brand partner, Costco Wholesale Corp.
Net income slid 14 percent to $1.27 billion, or $1.24 a share, from a year earlier, the New York-based company said Wednesday in a statement, missing the $1.31 average estimate of 29 analysts surveyed by Bloomberg. Earnings per share will be between $5.20 and $5.35 in 2015, compared with $5.56 last year, AmEx said.
“The decline in earnings was worse than investors were expecting," Jim Shanahan, an analyst at Edward Jones & Co., said in an e-mailed statement. “Competition in the credit-card industry continues to pressure swipe fees charged to merchants."
Higher spending, changes to co-brand partnerships and a stronger U.S. dollar crimped earnings, AmEx said in the statement. Revenue from all business lines except U.S. card services fell in the quarter. Earnings from fees the company charges merchants to process cards, known as discount revenue, fell 2.3 percent. Total expenses rose 2.8 percent to $5.73 billion, while revenue declined 1.3 percent to $8.19 billion, missing estimates..
Chenault is bolstering spending on marketing and other incentives to convince Costco shoppers to use other AmEx cards, as well as investing in new products and expanding existing card rewards. The lender announced new deals with retailers including Sam’s Club, a division of Wal-Mart Stores Inc., and a venture with Charles Schwab Corp. to create two co-brand credit cards.
In August, the activist hedge fund ValueActCapital Management disclosed it had purchased a $1 billion stake in AmEx, making it the company’s 12th-largest shareholder. While ValueAct hasn’t yet disclosed its plans, the fund typically favors companies they view as temporarily underpriced and prefers influencing managers and directors behind the scenes.