Amex, Navigant Report Favorable First-Quarter Earnings

Amex, Navigant Report Favorable First-Quarter Earnings

By Megan Hjermstad

American Express Co. and Navigant International Inc., the two publicly traded U.S.-based corporate travel management companies, both posted superior numbers for the first quarter that beat previous first-quarter performances and analysts' expectations.

American Express late last month reported a record first-quarter net income of $656 million, up from $575 million for the same period a year ago.

Earnings per share, on a diluted basis, rose 14 percent, from $1.26 to $1.44. Net revenues on a managed basis totaled $5.3 million, up 16 percent from $4.5 billion. The company's return on equity was 25.4 percent, up from 25.1 percent a year earlier.

Two areas--Travel Related Services and American Express Financial Advisors--impacted strong earnings and revenue growth overall.

American Express's Travel Related Service unit--which includes consumer cards, corporate cards and corporate and leisure travel domestically and abroad--reported record quarterly net income of $416 million, up 15 percent from $363 million in the first quarter a year ago. TRS' net revenues increased 18 percent to $4.04 million.

American Express attributed the impressive growth to higher billed business, average spending per card member, as well as increased loan balances. "Spending amounts are up in consumer and small business cards," said Susan Korchak, spokeswoman for American Express. American Express attributed the higher average spending to several factors, including new rewards programs and expanded merchant coverage.

The total number of American Express cards in circulation worldwide rose 12 percent to 47.9 million. In the United States--where the company launched the online purchasing card Blue--the number of cards rose 12 percent to 31.4 million. "We returned to double-digit growth in corporate card, an area that has come under pressure," said Korchak.

Meanwhile, Navigant, which went public in June 1998, reported record revenues of $73.3 million for the first quarter, up 34.3 percent from $54.6 million in the first quarter of last year. Operating income, before a non-recurring charge taken in the first quarter 2000 for cost reduction measures related to regional consolidations, increased 34.7 percent, to $9.7 million from $7.2 million for the first quarter of last year.

Navigant's first-quarter net income, before the non-recurring charge, rose from $3.5 million or $.27 per diluted share to $4.2 million or $.33 per diluted share this year.

"The model we had built, which predicted $.30 per share, Navigant exceeded," said Rob Brookby, entertainment and leisure analyst at St. Petersburg, Fla.-based Raymond James Financial Center.

Navigant's earnings before interest, taxes, depreciation and amortization for 1Q00 increased to $10.8 million from $9.6 million for the first quarter of 1999.

Brookby was expecting flat organic growth, which he said may have been conservative since Navigant reported 5 percent internal growth in existing operations, not including revenues from 10 acquisitions completed since the first quarter of fiscal 1999.

"This growth is organic growth from same store sales, growth from retaining customers and opening new accounts," said Edward Adams, Navigant chairman and CEO.

"Acquisition-driven growth is interesting because companies have to pay for it," said Brookby. "The flavor we got was that that the acquisitions appear to be paying off with higher year-over-year revenue. Taking small bits and adding it to the whole has synergy value.