In the fourth quarter of 2023, American Express Company (NYSE:AXP) reported earnings per share (EPS) of $2.62, missing the Zacks Consensus Estimate by 1.1%. Despite the miss, the bottom line saw a significant 27% year-over-year increase.
The total revenues net of interest expense for the quarter reached $15.8 billion, reflecting an 11% year-over-year improvement. However, the top line fell short of the Zacks Consensus Estimate by 1.4%. The quarterly results were impacted by rising expenses related to customer engagement and compensation, although this was partially offset by increased net interest income and higher Card Member spending.
Q4 Operational Performance
Network volumes in the fourth quarter amounted to $434.4 billion, marking a 5% year-over-year increase, primarily driven by heightened consumer spending. However, this figure lagged behind the Zacks Consensus Estimate of $442 billion. Total interest income reached $5.6 billion, a substantial 40% year-over-year increase that surpassed the consensus mark of $5.5 billion. Provision for credit losses also rose by 40% year over year to $1.4 billion due to an increase in net write-offs.
Total expenses for the quarter increased by 5% year over year to $11.9 billion, driven by elevated customer engagement costs arising from expanded Card Member spending and increased usage of travel-related benefits.
Segmental Performances
The U.S. Consumer Services segment reported a pre-tax income of $1.5 billion, representing a 14% year-over-year increase in the fourth quarter, surpassing the Zacks Consensus Estimate of $1.3 billion. Total revenues net of interest expense grew by 13% year over year to $7.4 billion, supported by improved net interest income and higher Card Member spending.
The Commercial Services segment recorded a pre-tax income of $666 million in the quarter, reflecting a 22% year-over-year increase but falling short of the Zacks Consensus Estimate of $676 million. Total revenues net of interest expense amounted to $3.8 billion, a 7% year-over-year growth driven by increased net interest income.
The International Card Services segment reported a pre-tax income of $144 million in the fourth quarter, a significant improvement compared to the pre-tax loss of $15 million in the prior-year quarter. Total revenues net of interest expense increased by 12% year over year to $2.7 billion, driven by expanding Card Member spending and rising card fee revenues.
The Global Merchant and Network Services segment’s pre-tax net income of $822 million advanced 19% year over year but fell short of the Zacks Consensus Estimate of $845 million. Total revenues net of interest expense rose by 10% year over year to $1.94 billion, supported by growth in merchant-related revenues.
Corporate and Other incurred a pre-tax loss of $589 million in the fourth quarter, narrower than the prior-year quarter’s loss of $638 million.
Balance Sheet (as of Dec 31, 2023)
As of the end of the fourth quarter in 2023, American Express had cash & cash equivalents of $47 billion, marking a 38% year-over-year increase. Total assets grew by 14% year over year, reaching $261 billion. Long-term debt amounted to $48 billion, showing a 12% year-over-year increase, while short-term borrowing came in at $1 billion. Shareholders’ equity increased by 12% year over year, reaching $28 billion. However, the return on average common equity deteriorated by 110 basis points year over year, standing at 33%.
Capital Deployment Update
In the fourth quarter of 2023, American Express repurchased six million common shares. On January 26, 2024, the management approved a 17% increase in the first quarter 2024 dividend on common shares outstanding, with the increased dividend amounting to 70 cents per share.
2024 Outlook
For 2024, AXP anticipates revenue growth between 9% and 11% from the 2023 $60.5 billion. Earnings per share are estimated to be in the range of $12.65 to $13.15, with the mid-point indicating a 15.1% improvement from the 2023 level of $11.21.
Long-Term View Reaffirmed
American Express maintains its expectation of more than 10% revenue growth over the long term, with earnings per share continuing to register mid-teens growth.
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