Solid results from American Express for 3Q24 📊

American Express (AXP.US) released its 3Q24 results. The company slightly disappointed at the revenue level, however, it beat consensus forecasts in other important financial data. Nonetheless, the stock lost in pre-open market trading, falling by approx. -1,3%. 

American Express has had a very successful year, gaining more than 50% since the beginning of 2024. Source: xStation 

In 3Q24, the company generated revenue of $16.64 billion (+8.2% y/y). This figure is slightly below consensus expectations, which expected $16.67 billion. The weaker result is mainly due to lower growth in transaction fee income, which rose to $8.78 billion in 3Q24, compared to the estimated $8.84 billion. Card fee revenue was even lower than forecast, coming in at $2.17 billion against an estimate of $2.38 billion. Nonetheless, the segment continues to maintain a very high growth rate of 18% y/y. 

Higher net interest income in an environment of still-high interest rates, supported by increased loan volumes and underpinned by steady growth in cardholder spending underpinned the strong revenue momentum in the quarter.

American Express is increasing the pace of premium card user acquisition, with the number of new cards rising to 3.3 million. The fastest-growing group of users are customers from the Millenials and Gen Z generation, who account for about 80% of new users. To sustain interest from this groups, the company still needs to expand its card benefit offerings, hence the growth rate of spending on card rewards rose 9.9% year-on-year to $4.17 billion in 3Q24. While this is higher than revenue growth, it is still lower than the consensus forecast. The company also reported that total loans to card users increased 18% y/y to $134.55 billion (vs. estimate: $133.51 billion). Provisions for loan losses grew to $1.4 billion, compared to $1.23 billion in the previous year. 

In the face of lower growth in sales, the company lowered its revenue forecast to around 9% vs. the previous 9%-11%, while it raised its earnings per share projection to a range of $13.75-14.05 (previous: $13.3-13.8). 

American Express' results indicate stable revenue momentum, effective cost discipline and a high rate of new customer acquisition base. The reaction in trading before the markets opened may be related to high expectations for the earnings season, as well as the realization of profits in the face of the company's piercing of ATH levels in the last session. Thus, the published results do not indicate a change in the trend on the company's stock price. 

FINANCIAL RESULTS 3Q24

• Revenue $16.64 billion, +8.2% y/y, estimate $16.67 billion
  • Discount revenue $8.78 billion, +4.4% y/y, estimate $8.84 billion
  • Net card fees $2.17 billion, +18% y/y, estimate $2.38 billion
• Provision for credit losses $1.4 billion
• Network volume $441.0 billion, +5% y/y, estimate $440.14 billion
• Billed business $387.3 billion, +5.8% y/y, estimate $386.91 billion
• Total expenses $12.08 billion, +9.3% y/y, estimate $12.26 billion
  • Card rewards expenses $4.17 billion, +9.9% y/y, estimate $4.24 billion
• Total card member loans $134.55 billion, estimate $133.51 billion
• Effective tax rate 21.8%, estimate 22.5%
• Adjusted EPS $3.49, estimate $3.29
• EPS $3.49 vs. $3.30 y/y