In the third quarter of 2024, American Express (NYSE: AXP) showcased a robust financial performance, reporting a net income of $2.51 billion, or $3.49 per share. This marks an increase from the previous year’s net income of $2.45 billion, or $3.30 per share, reflecting a year-over-year growth of 6% in earnings per share (EPS).
The company’s total revenues net of interest expenses reached a record $16.6 billion, an 8% increase from the $15.4 billion reported in the same quarter last year. This growth in revenue was primarily driven by higher net interest income, stable Card Member spending, and accelerated card fee revenue growth.American Express’s billed business also saw a significant rise, with transaction volumes amounting to $387.3 billion, marking a 6% increase compared to the previous year. The company attributed this growth to its strategic investments in product refreshes and the introduction of new premium card offerings, which have resonated well with Millennial and Gen-Z consumers.
The third quarter also saw a 6% increase in total Card Member spending, and card fee revenue growth accelerated to 18%. These figures underscore the company’s ability to attract and retain a large number of new premium Card Members while maintaining high retention rates and excellent credit performance.The company’s consolidated expenses increased by 9% to $12.1 billion, primarily due to higher variable customer engagement costs driven by increased Card Member spending and usage of travel-related benefits. Additionally, marketing investments and operating expenses contributed to the rise in consolidated expenses.
Despite these higher expenses, the effective tax rate for the quarter was 21.8%, up slightly from 20.9% a year ago, reflecting discrete tax benefits in the prior-year period.
Performance Versus ExpectationsAmerican Express’s third-quarter financial results exceeded market expectations. Analysts had projected an EPS of $3.38 and revenue of $16.68 billion. The company surpassed and matched these expectations with an EPS of $3.49 and revenues of $16.6 billion, respectively.The company’s ability to meet and outperform expectations can be attributed to several factors, including its effective management of credit performance and its strategic focus on enhancing value propositions through product refreshes.
The launch of new card products, such as the U.S. Consumer Gold Card, has been particularly successful in attracting younger consumers, contributing to the company’s overall growth. Furthermore, American Express’s disciplined expense management and investment in marketing and technology have bolstered its competitive position in the market.Despite the increase in provisions for credit losses, which rose to $1.4 billion from $1.2 billion a year ago, American Express maintained a strong credit performance, with a net write-off rate of 1.9%. This rate is slightly higher than the 1.8% reported a year ago but shows improvement from the 2.1% in the prior quarter. The company’s ability to manage credit risks effectively has been a key factor in its ability to exceed market expectations.
American Express Raises Full Year EPS Guidance to $13.75 to $14.05 RangeAmerican Express has raised its full-year EPS guidance to a range of $13.75 to $14.05, up from its previous guidance of $13.30 to $13.80. The company expects full-year revenue growth to remain within its annual guidance range of around 9%. This optimistic outlook is based on the strong earnings generated by its core business and the continued momentum from its product refresh strategy.The company’s leadership, led by Chairman and CEO Stephen J. Squeri, expressed confidence in American Express’s ability to sustain its growth trajectory. The successful launch of new card products and the continued attraction of premium Card Members are expected to drive future growth.
Additionally, the company’s focus on enhancing its value propositions, particularly in popular categories like dining, is anticipated to fuel further expansion.More By This Author:Procter & Gamble Reports Mixed First Quarter Results With $21.7 Billion In Net Sales 3 Stocks With Heavy Short Interest In October: Worth The Squeeze? Intel Struggles With 37% One Year Stock Decline Amid Layoffs And Scrutiny
