American Express surpasses EPS forecasts and raises guidance, yet shares fall

American Express Company (NYSE: AXP) surpassed expectations for per-share earnings in its second financial quarter, driven by a growing number of cardholders and robust double-digit growth in card fees. Despite this, the stock experienced a decline.

American Express reported earnings of $3.02 billion or $3.49 per share (adjusted) in Q2, significantly higher than $2.17 billion a year ago and surpassing the $3.24 per share consensus.

However, the company’s 8.0% annualized revenue growth to $16.3 billion fell short of the $16.6 billion analysts had forecast, according to the earnings release published on Friday.

Despite having $15 billion in revenue in the same quarter last year, missing revenue estimates led to a 2.0% drop in the multinational’s shares today.

Revised full-year guidance

Interestingly, the price action comes as American Express raised its guidance for the full year. The company now expects per-share earnings to fall between $13.30 and $13.80 in 2024, up from the previous outlook of $13.15 at the top end.

However, AMEX left its revenue growth guidance unchanged at 9% to 11%.

Chief Executive Stephen J. Squeri praised the company’s credit performance in the press release and disclosed plans to increase marketing investments by about 15% moving forward.

He also revealed provisions for credit losses at $1.3 billion for the second quarter, a $100 million increase from a year ago. While AXP saw higher net write-offs in Q2, it experienced a lower reserve build year-over-year.

New card acquisitions and market performance

American Express reported 3.3 million new card acquisitions for the second quarter, with billed business up by 5.0%.

The financial services giant has seen a nearly 40% increase in card member spending and close to 50% growth in revenue in less than four years. AXP is currently up more than 100% since its low in early 2021.

Last week, analysts at Barclays reiterated their “equal weight” rating on American Express stock, partly due to its over 30% gain this year. Despite this, AMEX is already trading well above their price target of $223.

On a positive note, Norden Group recently acquired 1,645 shares of American Express, according to its securities filing on July 13th. In June, AXP announced two new acquisitions: Rooam and Tock, which align with the company’s strategic growth initiatives.

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