Yahoo Finance American Express Co (AXP) Q3 2024 Earnings Call Highlights: Record Revenues and Raised EPS Guidance
Earnings Per Share (EPS): $3.49 for Q3 2024.
Revenue: $16.6 billion, up 8% year-over-year.
Full-Year EPS Guidance: Raised to $13.75 - $14.05.
Revenue Growth Expectation: Around 9% for the full year.
Net Card Fees Growth: 18% on an FX-adjusted basis.
Bill Business Growth: 6% on an FX-adjusted basis.
Net Interest Income Growth: 17% on an FX-adjusted basis.
Variable Customer Engagement Expenses: Up 10% year-over-year.
Marketing Expense: $1.5 billion for Q3 2024.
Operating Expenses: $3.8 billion, up 5% year-over-year.
Capital Return: $2.4 billion returned to shareholders, including $1.9 billion in share repurchases.
CET1 Ratio: 10.7%.
Release Date: October 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
American Express Co (NYSE:AXP) reported a strong Q3 with earnings per share of $3.49 and revenues of $16.6 billion, marking the 10th consecutive quarter of record revenues.
The company raised its full-year EPS guidance to between $13.75 and $14.05, reflecting confidence in its earnings power.
American Express Co (NYSE:AXP) has successfully refreshed 40 products globally this year, adding value through new benefits and services.
The US Consumer Gold Card has seen a 30% higher acquisition rate than the Platinum Card, particularly popular among Millennials and Gen-Z consumers.
International card services showed strong performance with spend growth of 13%, with markets like Japan and Mexico growing at 17% and 15% respectively.
Negative Points
Bill business growth was stable but modest at 6% on an FX-adjusted basis, indicating a need for acceleration to meet long-term revenue growth aspirations.
Organic spending among existing customers, particularly in the small business segment, has been less robust, impacting overall spend per member.
The company faces a competitive environment in the dining space, despite investments in platforms like Resy and Tock.
Variable customer engagement expenses grew by 10%, outpacing spend growth, which could impact margins if not managed carefully.
The company anticipates modest upward pressure on delinquency and write-off rates as it continues to acquire new customers and increase lending.
Q & A Highlights
Q: Given the updated guidance, is it possible to achieve 10% plus revenue growth in the current spending backdrop? A: Stephen Squeri, Chairman and CEO, stated that for American Express to reach its aspirational goal of 10% revenue growth, bill business must accelerate. The company has a balanced approach with spending, net interest income (NII), and card fees. While card fees continue to grow at accelerated rates, achieving 10% revenue growth would require an uptick in billings, especially in a more robust economic environment.
Q: Can American Express sustain mid-teens EPS growth even if billings growth does not accelerate? A: Stephen Squeri confirmed that even with a consistent 6% billings growth, the company can achieve mid-teens EPS growth. The focus remains on acquiring new cardholders, upgrading existing members, and growing NII. The investments in acquiring Millennials and Gen-Z customers are expected to drive future growth as these cohorts mature and increase their spending.
Q: Why did business development spend come in below expectations, and was there any impact from weather on the guidance? A: Christophe Le Caillec, CFO, explained that business development expenses are tied to agreements with customers and co-brand partners. Lower billing levels resulted in reduced incentives paid back to customers. There was no impact from weather on the guidance.
Q: With earnings above initial guidance and revenues at the low end, why is American Express letting so much fall to the bottom line instead of pulling forward investments? A: Stephen Squeri noted that the company has ramped up investments in marketing and technology throughout the year. The current investment levels are substantial, and while they plan to increase investments in 2025, it's challenging to pull forward more investments into the current year without compromising standards.
Q: How does American Express view the impact of Fed easing on bill business growth? A: Christophe Le Caillec mentioned that while the immediate impact of Fed easing on spend patterns is minimal, the expectation is that consumer and small business confidence will improve, potentially supporting billing growth. The company sees no evidence of stress in credit metrics and expects that rate cuts could eventually bolster consumer and small business confidence.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
