American Express Shines with Strong Q3 Earnings
The financial services giant, American Express Co (NYSE:AXP), has reported an impressive 8% year-over-year growth in revenue, reaching $16.64 billion in the third quarter. Although this figure slightly missed the analyst consensus estimate of $16.67 billion, the company’s stock price initially surged before giving up some of the gains in the premarket session on Friday.
Driving Growth: Higher Net Interest Income and Card Fee Revenue
The significant revenue growth was primarily driven by higher net interest income, increased Card Member spending, and continued strong card fee growth. Adjusted earnings per share (EPS) came in at $3.49, beating the analyst consensus estimate of $3.28.
Card Member Spending Sees Healthy Growth
Card Member spending, also known as Billed Business, grew 6% year-over-year to $387.3 billion, with a 6% increase on a foreign exchange-adjusted basis. This growth was evident across various segments, including U.S. Consumer Services, Commercial Services, and International Card Services, which saw revenue increases of 10%, 7%, and 11%, respectively.
Expenses and Provision for Credit Losses Rise
Total expenses increased by 9% year-over-year to $12.1 billion, primarily due to higher customer engagement costs resulting from increased Card Member spending, higher usage of travel-related benefits, and increased marketing investments. The provision for credit losses stood at $1.4 billion, compared to $1.2 billion a year ago, reflecting higher net write-offs.
FY24 Outlook: Revenue Growth and EPS Guidance Revised
American Express has revised its FY24 outlook, expecting revenue growth of 9% or $65.96 billion, compared to prior expectations of 9%-11% or $65.96 billion-$67.17 billion. The company has also raised its EPS guidance to $13.75-$14.05, up from $13.30-$13.80 previously.
Wall Street Reaction
Despite the strong earnings report, at least three Wall Street firms, including JP Morgan, HSBC, and BTIG, downgraded the stock in October, citing concerns over inflation and higher interest rates affecting consumer demand. However, American Express stock has still managed to surge 89% in the last 12 months.
Current Market Performance
As of the last check on Friday, AXP stock was down 2.79% at $277.80 in premarket trading.
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