Jamie Spencer
American Express Co. reported a 12% increase in profits, fueled by higher-than-expected consumer spending during the holiday season. The company’s strong performance in the fourth quarter signals continued momentum into the new year, with executives projecting further revenue growth.
Strong Holiday Spending Boosts Growth
Transaction volume across Amex credit cards and financial products, known as billed business, climbed 8% to $408.4 billion in the fourth quarter. Net income for the period reached $2.17 billion, or $3.04 per share, slightly missing analyst estimates.
“We exited the year with increased momentum, with billings growth accelerating to 8% in the fourth quarter, driven by stronger spending from our consumer and commercial customers during the holiday season,” said CEO Steve Squeri in a statement on Friday.
Revenue Projections Remain Strong
Amex expects full-year revenue to grow between 8% and 10%. According to Squeri, this growth is closely tied to customer spending patterns, meaning the company could reach the high end of its revenue guidance if spending levels remain strong.
The company’s stock, however, fell 1.4% to $321.32 at market open in New York. Despite this slight dip, shares have surged 73% over the past 12 months, reflecting investor optimism about Amex’s long-term outlook.
Consumer Confidence and Travel Trends
Squeri pointed to growing economic optimism as a key driver of spending. “There’s some euphoria in the economic environment in the United States right now. The dollar is very, very strong,” he said.
With the U.S. dollar maintaining strength, Squeri expects more U.S.-based travelers to head abroad this year, further boosting Amex’s travel and hospitality segments.
Investments in Travel and Dining Rewards
Amex continued to expand its premium offerings in 2023 to attract high-spending consumers. Notable moves included:
- Acquiring the restaurant and event booking platform Tock in June.
- Refreshing its Gold Card in July with a $100 annual statement credit for Resy-linked restaurants in the U.S.
- Strengthening its co-brand partnership with Delta Air Lines, which expects Amex payments for loyalty points to reach $10 billion annually in the long term.
Regulatory Settlement and Compliance Efforts
Amex recently agreed to pay $230 million to settle federal investigations into its sales practices related to small-business products. The company has since discontinued the affected products, taken disciplinary action against those involved, and enhanced its compliance programs.
Delinquencies and Credit Performance
Despite increased spending, Amex maintained strong credit performance:
- Thirty-day delinquency rates remained flat compared to last year.
- Net write-off rates declined by one basis point.
- Both measures remain below pre-pandemic levels, underscoring strong financial discipline.
“Consumer confidence is getting higher, and that’s translating into potentially more spending,” Squeri noted.
Conclusion
American Express is riding a wave of strong consumer and business spending, positioning itself for continued growth in 2024. While regulatory challenges remain, the company’s investment in premium travel and dining experiences, coupled with strong credit management, ensures it remains a dominant force in the financial services industry.
