American Express Surpasses Q1 Earnings Expectations

American Express Company (NYSE:AXP) posted first-quarter 2024 earnings per share (EPS) of $3.33, surpassing the Zacks Consensus Estimate by 12.1%. The bottom line surged 38.8% year over year.

Total revenues, excluding interest expense, reached $15.8 billion, outperforming the Zacks Consensus Estimate by 0.3%. Year over year, the top line increased by 10.6% during the quarter.

The robust quarterly performance was fueled by enhanced net interest income and an expanded customer base among Millennials and Gen-Z, driving growth in the U.S. Consumer Services Billed business. However, escalating customer engagement and compensation expenses partially offset these gains.

Q1 Operational Performance

Network volumes amounted to $419 billion, marking a 5% increase year over year in the first quarter, driven by higher consumer spending. Despite this growth, the figure slightly missed the Zacks Consensus Estimate of $420 billion. Total interest income reached $5.8 billion, rising by 31% year over year and surpassing the consensus mark of $5.6 billion.

The provision for credit losses rose by 20% yearly to $1.3 billion, primarily due to increased net write-offs, albeit partially offset by a reduced net reserve build. Total expenses climbed by 3% year over year to $11.4 billion, primarily driven by elevated customer engagement costs resulting from expanded Card Member spending and increased usage of travel-related benefits.

Segmental Performances

U.S. Consumer Services: Pre-tax income reached $1.6 billion, marking a 43% year-over-year increase in the first quarter and surpassing the Zacks Consensus Estimate of $1.3 billion. Total revenues, excluding interest expense, grew by 14% year over year to $7.5 billion, driven by improved net interest income and higher Card Member spending.
Commercial Services: Recorded a pre-tax income of $878 million in the quarter, up by 39% year over year but missing the Zacks Consensus Estimate by 6.1%. Total revenues, excluding interest expense, amounted to $3.8 billion, growing by 8% year over year, driven by increased net interest income.
International Card Services: Reported a pre-tax income of $252 million in the first quarter, marking a 33% year-over-year increase. Total revenues, excluding interest expense, improved by 8% year over year to $2.7 billion, primarily due to expanding Card Member spending and rising card fee revenues.
Global Merchant and Network Services: Pre-tax net income reached $1 billion, up by 15% year over year in the quarter, surpassing the Zacks Consensus Estimate of $958 million. Total revenues, excluding interest expense, rose by 7% year over year to $1.9 billion, driven by growth in merchant-related revenues.
Corporate and Other: Incurred a pre-tax loss of $615 million in the first quarter, narrower than the prior-year quarter’s loss of $667 million.

Balance Sheet (as of Mar 31, 2024)

American Express closed the first quarter with cash & cash equivalents of $54 billion, up by 32% year over year. Total assets reached $269 billion, growing by 14% year over year.

Long-term debt amounted to $49 billion, increasing by 20% year over year, while short-term borrowing stood at $2 billion. Shareholders’ equity improved to $29 billion, marking a 12% year-over-year increase. Return on average common equity surged by 580 basis points year over year to 35.9%.

Capital Deployment Update

In the first quarter of 2024, American Express repurchased five million common shares. On Jan 26, 2024, management approved a 17% increase in the first quarter 2024 dividend on common shares outstanding, totaling 70 cents per share.

2024 Outlook Reiterated

AXP expects revenues to grow between 9% and 11% in 2024 from the 2023 level of $60.5 billion. Management estimates earnings per share in the range of $12.65-$13.15, indicating a mid-point improvement of 15.1% from the 2023 level of $11.21.