Blue chip stocks: Amex earnings rise on strong consumer spending

American Express Co., New York symbol AXP, gets most of its revenue from the fees it charges merchants when consumers use its credit and charge cards. It also provides travel-agency services. American Express is one of the blue chip stocks we analyze in Wall Street Stock Forecaster, our newsletter for investing in the U.S. stock markets. The company continues to set aside less money to cover bad loans as more of its cardholders pay their bills on time. In the three months ended June 30, 2011, the blue chip stock’s loan-loss provisions fell 45.2%, to $357 million from $652 million a year earlier. As a result, the company earned $1.3 billion, or $1.07 a share, in the quarter. That’s up 27.3% from $1.0 billion, or $0.84 a share, a year earlier. The blue chip stock’s revenue rose 11.9%, to $7.6 billion from $6.8 billion. That’s mainly because spending by the company’s cardholders rose 18% as the economy improved. However, lower interest rates have dampened income from its investment portfolio. American Express mainly caters to affluent customers, so it’s not as vulnerable to high unemployment rates and slow housing markets as other lenders. However, its plans to spend more on new rewards programs and other customer incentives could slow its earnings growth. Such spending is mostly what pushed expenses 21% higher in the latest quarter than a year ago. American Express is a dividend paying stock. Its annual rate of $0.72 a share yields 1.5%. American Express is just one of the stocks we analyze in our Wall Street Stock Forecaster newsletter. You can get the latest issue, along with 5 in-depth Special Reports, access to our weekly Email/Telephone Hotlines and much more absolutely FREE when you subscribe now. Click here to learn how.