- Sales and earnings top forecasts
- Higher spending and interest charges
- Full-year earnings target maintained
Those looking for evidence wealthy US Americans are still spending freely need look no further than American Express (AXP) after the credit card giant topped first-quarter earnings expectations on Friday (19 April).
The shares leapt 6% to a new all time high of $231 taking year-to-date gains to 23% compared with a 5% gain for the S&P 500 index.
The New York-based company delivered a 39% increase in EPS (earnings per share) to $3.33, besting Street forecasts of $2.95, thanks to overall card spending rising 7% and interest income jumping 28% driving net revenue up 11% to $15.8 billion.
WHAT DID THE COMPANY SAY?
Chairman and chief executive Stephen J, Squeri said: ‘We have started 2024 off strong, with our first-quarter results reflecting the positive trends we have seen in our business the last several years.’
‘We continue to attract high-spending, high credit-quality customers to the franchise, with new card acquisitions accelerating sequentially to 3.4 million in the quarter.
‘Our fee-based products accounted for around 70 percent of the new account acquisitions we saw in the quarter, and we continue to see strong demand from Millennial and Gen Z consumers, who accounted for over 60 percent of new consumer account acquisitions globally.’
BAD LOANS CREEP UP
Although the company’s affluent customer base has helped shield it from the worst effects of higher interest rates and inflation, charge-offs and 30-day delinquencies crept higher although they are still below pre-pandemic levels.
Provisions for credit losses increased 18% to $1.3 billion compared with a year ago reflecting higher net write-offs partially offset by lower net reserve build of $148 million ($328 million in 2023).
Interestingly, the company also noted some weakness in small- and medium-sized business spending.
Looking ahead, management reiterated full-year guidance which calls for 9% to 11% revenue growth and EPS in the range of $12.65 and $13.15, equating to 13% to 17% growth.
