Amex's Big Swinging Black Cards Lead the Way to Record Earnings... (Wall Street Shouts Fools Gold?)

American Express just clocked in its 10th consecutive quarter of record revenue, proving once again that catering to the higher-end consumer is like owning a cheat code in the world of finance.

(Source: Giphy) 

Buuuuut, before you get all horned up, there’s a catch to this record revenue. You see, while Amex’s earnings per share (EPS) of $3.49 beat Wall Street’s estimates, revenue fell just short of expectations, placing the company in a weird financial limbo that includes: it’s good, but not good, and kinda still good at the same time. 

(Source: Giphy) 

For instance, revenue for the quarter came in at $16.64 billion — up 8% year-over-year, which sounds impressive until you realize analysts were expecting $16.67 billion. That’s right, Amex missed by a sliver. You could practically hear the collective groan of the Wall Street suits who were hoping for a flawless earnings report. 

(Source: Yahoo Finance) 

However, with that said, Amex still raised its full-year EPS guidance to between $13.75 and $14.05, because who doesn’t like some good old-fashioned optimism? As for revenue growth, they’ve dialed expectations to the low end of the 9% to 11% range. So you see? Kinda still good despite disappointing overpaid expert number crunchers. 

The real MVP of Amex’s earnings though was none other than their “billed business” numbers.That’s the official term for what we mere mortals call “cardholder spending.” And let me tell you, Amex's affluent clientele have been swiping like there’s no tomorrow. Billed business grew 6% year-over-year to $387.3 billion.

(Source: Giphy) 

But, but, but… it wasn’t just the U.S. big spenders flexing their big swinging black cards last quarter. International Card Services revenue also surged 11% year-over-year, and U.S. Consumer Services revenue climbed 10%. Turns out, Amex cardholders are really into racking up points, whether they’re buying a new Tesla or just splurging on a six-course tasting menu. 

(Source: Reuters) 

In addition, Amex’s total expenses did rise 9% (thanks to higher customer engagement costs and marketing spend), but Amex has been surprisingly efficient at controlling other costs. CFO Christophe Le Caillec even bragged about how they’ve managed to rein in expenses better than expected. 

In fact, Le Caillec is so confident in their ability to keep the financial ship steady that he’s predicting mid-teens EPS growth, regardless of whether revenue clocks in at 9%, 10%, or 11%. Doable or wishful thinking? Only time will tell of course, but regardless, one can’t deny the absolute tear Amex has been on this year either. 

(Source: Amex) 

With the stock soaring 47.70% YTD, hitting an all-time high just before the earnings report, the momentum is still strong even after a post-earnings hangover - where shares dropped 5% after the revenue miss. Of course, Bank of America analysts saw this as an opportunity to drink some hatorade as they predict Amex’s revenue growth will clock in at the bottom of its guidance range for 2024 - with Morgan Stanley’s team expecting growth to land around 9.3% (a.k.a. Barely above the minimum). 

But hey, for now, it’s no secret that Amex is still standing tall. With no major debt and $200 million in cash on its balance sheet, it’s not like they’re going broke anytime soon. So, is American Express still the gold standard of credit cards? Sure. But whether it stays that way depends on how well they can keep delivering those sweet, sweet earnings…

Especially considering that Amex’s expansion strategy is heavily reliant on its high-rolling clientele, which is great until the economy starts feeling the heat. So yeah, there’s that.

(Source: Barrons) 

In the end though, Amex is riding high on record revenue, but a revenue miss and slowing growth have some analysts worried. Still, the company’s cost-cutting efforts and affluent clientele are keeping it in the game — for now.

In the meantime, keep an eye on American Express and the rest of the financial sector going forward and as always stay safe and stay frosty, friends! Until next time… 

P.S. Get you some of that! 203% in less than four hours?! Are you kidding me? No my friend, I’m not. Which is why after last week's monster winner, we’re eyeing an even more explosive setup for next week… and let me tell you, you’re going to want to be one of the first to know once we drop the ticker. Click here asap to make sure you get it first! 

Stocks.News holds positions in Tesla as mentioned in the article.