American Express (NYSE: AXP) has cemented itself as a powerhouse in the financial services industry, raking in record revenues last year thanks to an upward trajectory in card spending coupled with strong customer engagement. With a strategy that encompasses a broad spectrum of customers, American Express has particularly focused on rejuvenating the small business enterprise segment, all while broadening its reach within the premium customer base in the U.S. through an innovative membership model. This dual approach has proved successful, positioning American Express as a force to be reckoned with among credit card issuaries.
Despite the volatile stock market performance experienced in 2023, American Express shares have embarked on a steady ascent this year, peaking to unprecedented heights recently. This rally not only reflects the company’s intrinsic strength but also underscores investors’ confidence in its growth trajectory. The blend of brand authority and robust network effects propels American Express toward a high-growth pathway, making its stock an appealing prospect for those looking to achieve long-term investment gains.
Bullish View
Set to unveil its second-quarter 2024 earnings on Friday, July 19, at 7:00 am ET, American Express is riding a wave of positive expectations. Analysts have pegged the consensus earnings estimate at $3.23 per share, a significant leap from the $2.89 per share profit reported in the same quarter the previous year. Revenue forecasts are equally optimistic, with projections set at $16.59 billion for the June quarter, marking a 10.2% increase year over year.
This bullish outlook is buttressed by a noticeable uplift in customer engagement, a direct result of the company’s ongoing investments in branding, value propositions, marketing strategies, and technological advancements. American Express’ strategic focus on attracting the younger demographics, particularly millennials and Gen-Z users, has borne fruit, with these groups accounting for approximately 60% of new consumer account acquisitions worldwide. This demographic shift not only augurs well for the brand’s contemporary relevance but also highlights its superior credit quality compared to competitors.
“We continue to attract high spending, high credit quality customers to the franchise with new card acquisitions accelerating quarter over quarter, adding 3.4 million new cards in the quarter. Our fee-based products accounted for approximately 70% of the new account acquisitions globally and we continue to see strong demand from Millennial and Gen Z consumers, who accounted for over 60% of the new consumer account acquisitions globally. Finally, our credit metrics continue to be best-in-class,” explained Amex CEO Steve Squeri.
Important Numbers
Looking ahead, American Express executives are forecasting a sustained momentum that would translate into a 9-11% growth in full-year revenues, with earnings anticipated to range between $12.65 per share to $13.15 per share. This estimate reflects a degree of caution, considering the ongoing economic headwinds, particularly the high interest rates which could dampen spending among small and midsize enterprise customers.
The first three months of fiscal 2024 saw the company announcing an 11% year-on-year surge in revenues, reaching $15.8 billion. This increase was attributed mainly to higher net interest income and elevated card member spending. Net income for the same period swelled to $2.4 billion or $3.33 per share, from $1.8 billion or $2.40 per share in the previous year, surpassing market expectations and setting a positive tone for the subsequent quarters.
Regarding stock performance, American Express has consistently traded above its long-term average, maintaining a bullish momentum in the lead-up to its earnings announcement. The stock, which opened around $240 on Monday, experienced an early upturn, reflecting the sustained investor optimism surrounding the company.
In summary, American Express stands out as a beacon of financial resilience and innovation. Its differentiated approach of focusing on high-value customer segments and leveraging technological advancements continues to bear fruit, manifesting in strong financial performance and robust stock price appreciation.
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The journey of American Express, from navigating the challenges of 2023 to achieving new heights in 2024, serves as a testament to its agility, strategic foresight, and customer-centric ethos. As we look forward to the company’s next earnings report, the anticipation is not just about the numbers but also about the stories of growth, resilience, and innovation that have become synonymous with the American Express brand. In this context, every quarter is not just a measure of financial performance but a chapter in the continuing saga of a business that has adeptly balanced tradition with innovation, ensuring its relevance and success in the dynamic world of financial services.
