American Express meets high expectations as affluent customers continue to spend

American Express (AXP) delivered a mixed set of results for its fourth quarter of 2024, reporting earnings per share (EPS) of $3.04, in line with Wall Street expectations, and revenue of $17.18 billion, narrowly beating consensus estimates of $17.17 billion. Despite these results, the stock fell 3.4% as investors weighed the company's guidance and rising expenses.

For fiscal year 2025, American Express forecasted revenue growth of 8% to 10% and EPS between $15.00 and $15.50, slightly above the analyst consensus of $15.24 at the midpoint. The guidance highlights management's confidence in the company’s ability to maintain momentum, particularly among its premium customer base and Millennial and Gen Z cardholders. The company also announced plans to increase its quarterly dividend by 17% to $0.82 per share.

Key metrics underscored strong consumer spending and controlled credit risk. Billed business rose 7.5% year-over-year to $408.4 billion, surpassing estimates of $402.49 billion. Total expenses climbed 11% to $13.1 billion, above expectations of $12.88 billion, driven by higher customer engagement costs and marketing investments. However, the provision for credit losses declined 9.5% to $1.3 billion, reflecting a lower reserve build year-over-year and solid credit performance. The net write-off rate fell slightly to 1.9%, remaining below pre-pandemic levels.

Delinquencies and credit quality remain critical focus areas for investors, and American Express delivered reassuring data on this front. Both delinquencies and write-offs remain below 2019 levels, reinforcing the resilience of its affluent customer base. This performance aligns with commentary from analysts like Retail_Guru, who noted, “Beauty of Amex is credit metrics remain very strong. Both delinquencies & write-offs continue below 2019 levels. $AXP bet on millennials paying off (spend this Q +16%) & risk under control.”

Spending patterns reflected resilience in the economy, particularly among affluent and business customers. Card Member spending reached record levels, with billings growth accelerating to 8% in the fourth quarter, driven by strong holiday season activity. Millennial and Gen Z customers continue to be a growth engine, contributing to a 16% increase in spending among this demographic. Additionally, record card fee revenues and 13 million new card acquisitions for the year signal robust demand for the company’s premium offerings.

Business spending also showed strength, as American Express continues to capitalize on its corporate card segment. The company’s strong network and value propositions for high-spending consumers and businesses have driven its ability to attract and retain customers. Despite broader concerns about potential economic softening, the spending data suggests that American Express is benefiting from its focus on affluent and high-credit-quality customers who are less sensitive to macroeconomic pressures.

Looking ahead, CEO Stephen Squeri expressed optimism, citing opportunities across the company’s premium customer base, international markets, and expanding merchant network. He highlighted the importance of disciplined expense management and investments in marketing, technology, and talent as drivers for sustained growth. “As we prepare to celebrate the 175th anniversary of American Express in March, we will continue to build on our history of growth and innovation,” Squeri said.

While American Express delivered a solid quarter and maintained robust credit metrics, the market’s reaction reflected concerns about rising expenses and the company’s ability to maintain momentum in a potentially slower economic environment. Investors will likely focus on the company's execution in the coming quarters, particularly in balancing growth investments with disciplined cost management. Despite the stock’s decline, American Express’ long-term prospects remain supported by its premium positioning, strong brand, and expanding customer base.