American Express reports record revenue for second quarter, shares dip

American Express’s second-quarter earnings jumped 9% to a record $16.33 billion due to robust spending from its affluent customers.

However, it still fell short of anticipations, sending shares of the credit card giant down 4.4%.

Record Revenue but Short of Expectations

American Express (AmEx) reported a record revenue of $16.33 billion for the second quarter, marking a 9% increase from the previous year. Despite this impressive figure, the results fell short of market expectations, leading to a 4.4% drop in the company’s stock price.

Impact of Wealthy Customers

The company, renowned for its affluent clientele, has been somewhat shielded from broader economic weaknesses.

While many lenders are grappling with sluggish loan demand amidst high borrowing costs, AmEx’s customer base has continued to drive robust spending. However, a slowdown in spending growth compared to the previous quarter has raised concerns among investors.

Spending Growth Slows

Billed business, a key measure of spending on AmEx cards, rose by 6% year-over-year in the second quarter, down from a 7% increase in the first quarter. This deceleration in growth, coupled with signs of waning wage growth, has led to worries about potential impacts on discretionary spending.

Revised Earnings Forecast

Despite the revenue miss, American Express has raised its earnings per share (EPS) forecast for 2024 to a range of $13.30 to $13.80, up from its previous estimate of $12.65 to $13.15.

Also read: Johnson & Johnson Exceeds Q2 Profit And Revenue Estimates

Citigroup analyst Keith Horowitz expressed confidence in the company’s management to control expenses and meet its EPS targets. However, he noted that the revenue shortfall could contribute to some weakness in the stock.

Increased Marketing Efforts

AmEx also announced a 15% increase in its marketing budget for this year compared to 2023. CEO Stephen Squeri clarified that this boost is aimed at attracting new cardholders and gaining market share, rather than responding to anticipated declines in spending.

Profit Performance

The company reported a profit of $3.02 billion, or $4.15 per share, for the quarter ending June 30, a 39% increase from the previous year.

Excluding a one-time gain, AmEx earned $3.49 per share, surpassing analysts’ expectations of $3.24 per share. However, its quarterly revenue of $16.33 billion fell short of the LSEG estimate of $16.59 billion.