American Express Earnings Beat Expectations

On Thursday, American Express CEO Kenneth Chenault announced that the company would be temporarily suspending its share buyback program following the recent overhaul of taxes. The program, said Chenualt, would be suspended for the first six months of the year.

The CEO added that they decided to rebuild capital due to an upfront charge that the new tax reform law triggered. Including the impact felt from the tax law, American Express posted a $1.2 billion net loss equal to $1.41 a share during its fourth quarter. In the same quarter one year ago, AmEx posted an $825 million net income equal to 88 cents a share.

Chenault did say the company would continue playing a quarterly dividend. He added that he believes the new tax legislation would ultimately impact the company and the economy positively.

AmEx also posted revenue and earnings for the quarter that beat expectations on Wall Street. Earnings per share ended at $1.58 while Wall Street was expecting $1.54. Revenue for the quarter reached $8.84 billion while analysts were expecting $8.72 billion.

AmEx stock dropped over 2% following the release of its filing for quarterly earnings.

Other businesses have reported large losses, citing a one-off charge for the new tax measure passed by Congress and signed into law by the President in December.

For instance, Citigroup posted a charge of $19 billion in the recent earnings report for the quarter, while Bank of America posted a charge of $2.9 billion that related to the new tax law. JPMorgan Chase took a hit for $2.4 billion from the reform law.

The one-off charge that the Tax Cuts and Jobs Act of 2017 mandated led to the first net loss for a quarter at AmEx in over two decades.

During October, the company said that Chenualt would retire in February. He is to be succeeded by Stephen Squeri who is now the Vice Chairman.

Berkshire Hathaway owner and legendary investor Warren Buffett, himself a longtime stakeholder of AmEx praised the impact Chenault had on the business. Buffet said that Chenault built on the company’s storied history through not abandoning its strengths, but building upon them while adding others.

It is expected that AmEx will benefit from the new tax reform and Deutsche Bank gave the company a rating of “buy” in part because of the anticipated positive effects of deregulation and tax reform.