↵
American Express (NYSE: AXP) capped off a record year with a strong fourth quarter that was fueled by robust holiday shopping.The credit card company generated $17.2 billion in revenue in the quarter, a 9% year over year increase. This topped estimates of $17.1 billion.The firm reported net income of $2.2 billion in Q4, which was 12% more than the same quarter a year ago. It earned $3.04 per share, which was 16% higher than a year ago, and beat estimates of $3.02 per share.The robust earnings allowed American Express to raise its dividend by 17% to 82 cents per share, up from 70 cents. This is the fourth straight year of dividend growth for American Express.
Record year in 2024
American Express stock had an outstanding year in 2024, with its stock rising 60%. It is off to another strong start in 2025, up another 10% year-to-date.Its success has been driven by record performance, nearly across the board. Revenue for the full year hit a record $65.9 billion, up 9% year over year, while net income rose 21% to a record $10.1 billion. Earnings per share shot up 25% to $14.01 per share in fiscal 2024.These results were backed by record spending by American Express card members of $1.76 trillion, a 5% year over year increase. The company also saw a spike of 8% in credit card loans to about $140 billion. Further, American Express generated record net card fee revenues of $8.5 billion, a 16% year over year gain, which was fueled by a record 13 million new card acquisitions.In addition, its discount revenue, which is income from swipe fees, rose 5% for the year to $35.2 billion. In the fourth quarter, discount revenue rose 7% to $9.2 billion, boosted by a strong holiday shopping season.The company also maintained a solid net charge off rate – which tracks bad debt. In the fourth quarter, the net charge off rate was 1.9%, same as the previous quarter and below pre-pandemic levels. The 30-day delinquent rate was 1.3%, also the same as the previous quarter and below pre-pandemic levels.Overall, provisions for credit losses in Q4 were $1.3 billion, which was less than the $1.4 in Q4 2023. Because this money set aside to account for bad debt and defaults was lower, it helped boost American Express’ earnings.“We exited the year with increased momentum, with billings growth accelerating to 8 percent in the fourth quarter, driven by stronger spending from our consumer and commercial customers during the holiday season,” American Express Chairman and CEO Stephen Squeri said. “We maintained our best-in-class credit performance and disciplined expense management throughout the year.”
12% to 16% EPS growth expected in 2025
American Express has traditionally had a wealthier customer base than the other credit card companies, which allows it to navigate downturns better than others. However, it has also become popular in recent years with Millennials and Gen Z Americans, as they like the perks and rewards.“I am confident that we can sustain our strong momentum over the long term, driven by the many attractive opportunities we see across our premium customer base, particularly with Millennial and Gen Z consumers and in key international markets, along with our operating expense leverage which enables us to continue investing at high levels to drive growth,” Squeri said.American Express guided for 8% to 10% revenue growth in 2025, which would be in the same range as 2024. Further, EPS is anticipated to be $15.00 to $15.50 per share, which would be a 12% to 16% year over year increase.Long term, American Express anticipates 10% annual revenue growth and EPS growth in the mid-teens.
Is American Express stock a buy?
American Express is a great all-weather stock, and it is still reasonable valued, given its steady earnings power.The stock recently got price target upgrades from UBS, RBC and Truist, but overall, analysts have a somewhat bearish view of American Express with a median price target of $290. That is about 9% below its current price of $319 per share.Maybe analysts are not comfortable with the valuation, with a P/E of 24, and the potential for an economic slowdown. I still like the stock long term, and I expect you’ll see more price target upgrades soon. However, the stock was trending lower post-earnings, down about 2%.Maybe it is based on the flat revenue growth projections, or anticipated competition from the pending Capital One/Discover merger. It could just be a pullback due to American Express’ rising valuation after a strong year.All that aside, American Express has built a great niche and has a titanium brand. It has been a long term winner. A dip like this might be a decent opportunity to buy it.More By This Author:Oracle Stock Rises On $500 Billion Stargate AI Infrastructure Project
3 Value Stocks Amid “Unsustainable” Market Euphoria
With M&A Activity Heating Up, These Investment Banking Stocks Should Rise
