The latest financial report from American Express (ticker: AXP) reveals a continued upward trajectory, with the company achieving its sixth consecutive quarter of record revenue. The impressive results have contributed to a 1% rise in the company’s stock during premarket trading.
Strong Revenue and Profit Growth
American Express reported a 13% increase in revenue compared to the same quarter last year, bringing the total to $15.4 billion. This figure aligns with the estimates provided by analysts surveyed by FactSet. Furthermore, the company’s profit exceeded expectations, experiencing a significant 30% growth and reaching $2.45 billion. This translates to earnings of $3.30 per share, establishing yet another record for American Express. Analysts had previously projected the company to earn $2.95 per share.
Robust Card Member Spending
Card member spending demonstrated remarkable growth, rising by 7% to reach $420 billion on a currency-adjusted basis. Within the United States, card spending saw a 9% increase compared to the previous year, while the international segment experienced a substantial surge of 15% after adjusting for currency fluctuations.
Continued Appetite for Travel and Entertainment
American Express observed that individuals and businesses have retained their desire to spend on experiences such as travel and entertainment. Expenditure in this category showed a significant rise of 13%, largely driven by increased spending on dining out at restaurants.
Expanding Demographic Appeal
American Express expressed optimism regarding its successful engagement of younger clients. The millennial and Gen Z customer base represents the fastest-growing demographic for the company, with spending increasing by an impressive 18% year over year. These customers also account for 60% of new accounts.
Maintaining Credit Quality
While celebrating its record-breaking results, American Express highlighted that credit quality remains strong, with net write-off and delinquency rates below pre-pandemic levels. However, the provision for credit losses increased by 58% to $1.2 billion compared to the same quarter last year, primarily due to a higher level of write-offs. It is worth noting that the net reserve build for the quarter amounted to $321 million, a slight improvement from $387 million in the previous year, indicating a marginally enhanced credit outlook.
A Steady-State Macro Outlook
Stephen Squeri, the Chief Executive at American Express, expressed confidence in the company’s future growth plans. “We believe we are well positioned as we seek to achieve our long-term growth plan aspirations in 2024 and beyond in a steady-state macro environment,” Squeri stated.