American Express beat Wall Street expectations early Friday and raised its outlook as upscale shopping bounced back and executives see no imminent slowdown. The Dow Jones stock rose near an all-time high, regaining a buy point.
The luxury credit card company earned $4.14 a share in the third quarter, an increase of 19% year over year. Revenue climbed 11% to $18.426 billion. It was the second straight quarter of accelerating EPS and sales growth. Analysts had modeled EPS of $4 on revenue of $18.047.
Net card fees of $2.54 billion also beat expectations.
Spending by card members accelerated to 9% in Q3, or 8% adjusted for currency rates. Growth in revolving loan balances and continued card-fee growth helped increase net interest income.
CEO Stephen Squeri said its updated consumer and business Platinum Cards, which it launched in September, are seeing the strongest start ever for a U.S. Platinum Card refresh. New Platinum account acquisitions are running at twice the rate before the refresh, he told analysts in the earnings call.
American Express caters to affluent shoppers, who pay premium annual fees. For example, the new fee for Platinum Cards, which goes into effect in a few months, is $895.
Yet, those shoppers continue to splurge.
After a flat second quarter, airline spending picked up 5% in Q3, while restaurant spending jumped 14%, Chief Financial Officer Christophe Le Caillec told analysts, according to a transcript via FactSet. Spending in front-of-cabin airfares climbed 14%.
Emerging Trend In Younger Shoppers
Notably, spending momentum is coming from younger customers, with Millennials and Gen Z now accounting for 36% of total spending, the same share as Gen X. The average transactions among Millennial and Gen Z card members per U.S. customer is about 25% higher than older cohorts, Le Caillec said.
Can the acceleration continue into the rest of the year? Squeri said he can't be sure. But he added, "I don't see anything in the horizon here that would indicate that billings are going to slow down or decline."
AmEx's optimistic report comes in contrast to worries about rising credit risks. On Thursday, SPDR S&P Regional Banking ETF tumbled 6.2% and Capital One Financial slid 5.5% in heavy volume. The tumbles came after Zions Bancorp disclosed a $50 million charge stemming from two business clients whose loans may not be repaid. Other red flags have surfaced about credit risks.
AmEx's own delinquencies are unchanged over the past many quarters, and write-offs fell slightly from the prior quarter, Squeri said.
"We still have a huge gap between us and our competitors," he said. "So I think the health of our consumer is really, really good. And they're spending, they're engaging with the product, and they're paying their bills. And I would argue that it looks like the health of our bank competitors' consumers are getting a little bit better."
AmEx raised its full-year guidance, citing the strong performance so far this year. It forecast earnings of $15.20-$15.50 a share on revenue growth of 9% to 10%. Analysts' consensus estimate for 2025 is $15.34 a share with sales up 8.5% to $71.575 billion.
AmEx Stock Back In Buy Zone
American Express — one of the Dow Jones Industrial Average components — has an IBD Composite Rating of 80, and an EPS Rating of 90.
AmEx stock jumped 6.2% to 343.17 in heavy trading after the earnings report. Shares reclaimed the 50-day moving average and the 329.14 buy point from an Aug. 29 breakout after dipping below those key levels on Thursday.
American Express' buy zone goes to 345.60. Shares are up 15% this year.
AmEx has a 21-day average true range (ATR) of 2.37%. The average true range, available on IBD MarketSurge, gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq still in a power trend, investors can buy stocks with ATRs up to 8%, though they should not be too concentrated in such stocks.
