American Express (AXP.US) reported better-than-expected profits in its Q3 earnings released on Friday, thanks to its strict cost management that helped mitigate the impact of declining merchant fees. According to the earnings data, American Express' Q3 revenue grew 8% YoY to $16.64 billion, slightly below the expected $16.67 billion. However, its net profit increased slightly by 2% YoY to $2.51 billion, topping analysts' expectations. The company's EPS in Q3 was $3.49, higher than the previous forecast of $3.28, reflecting consumers' continued preference for reward-rich credit cards, which prompted the company to raise its full-year earnings expectations. American Express now expects its EPS in 2024 to be between $13.75 and $14.05, higher than the previous forecast of $13.30 to $13.80.

Steve Squeri, CEO of American Express, said in an interview: "We've had 10 consecutive quarters of record revenue. This quarter was very strong. We not only beat our own expectations, but we raised the market's expectations. We're optimistic about the fourth quarter."

Despite the robust purchasing power of American consumers, rising interest rates and economic uncertainty may affect the purchase of non-essentials. According to data from the London Stock Exchange, American Express' discount revenue (i.e., the transaction promotion fees it collects from merchants) grew 4% QoQ to $8.78 billion in the quarter, but still fell short of the expected $8.85 billion.

Despite this, American Express was able to exceed profit expectations thanks to its customers' good credit standing, allowing the company to maintain lower credit loss provisions. The company's total expenses in the quarter were $12.08 billion, lower than the expected $12.74 billion. American Express said its total credit loss provisions were $1.4 billion, up from $1.2 billion a year ago.

Known for meeting the travel and hotel needs of high-spending consumers, American Express' Resy CEO reported that demand for dining out remained strong. Additionally, American Express said it had completed 40 product updates since the beginning of the year to enhance its value proposition and meet customers' financial and lifestyle needs.

Steve Squeri said in a statement: "The early performance of our product updates gives me confidence that we're investing in the right areas to enhance our value proposition and meet customers' financial and lifestyle needs."

As of the time of writing, American Express was trading 2.97% lower at $277.30 before the market opened.