American Express
The combination of higher rates and resilient consumer spending has led to the stock outperforming vs the broader market with a 10% YTD loss. Earnings have also continued to grow as earnings are triple what they were during the pre-pandemic period. Shares have also continued to get cheaper as it currently sports a forward P/E of 13.8 while its average P/E in the pre-pandemic period was regularly in the high teens. The company also has a P/FCF of 7.4 which should lead to a higher dividend or a boost in share buybacks.
Inside the Numbers
In Q3, American Express reported $2.47 in earnings per share which topped expectations of $2.40 per share. Revenue was up 24% due to strength in travel spending and no signs of decay in consumer spending. It also topped expectations at $13.6 billion vs $13.5 billion.
On the conference call, CEO Stephen Squeri said, "The demand for travel has exceeded our expectations throughout the year, with spending on T&E increasing 57 percent from a year earlier and T&E spending volumes in our international markets surpassing pre-pandemic levels for the first time this quarter, both on an FX-adjusted basis."
Travel trends should remain strong as companies continue to report strength in bookings and accelerating recoveries in business and international travel which have been two of the weakest segments.
One negative development was the company adding $387 million to its loan loss reserve buffer. It said this was due to its card business growing and increased risks are given the macro environment. Costs increased by 19% to $10.3 billion due to higher compensation costs and a write-off on venture investments.
For the full year, the company is projecting revenue growth between 23% and 25% and earnings of $9.75 per share. Both were slightly above analysts' estimates.
