Amex's earnings beat estimates, even as delinquencies rise

Susana Gonzalez/Susana Gonzalez

American Express posted its tenth consecutive quarter of record revenue and raised its guidance for 2024, but there has been a recent uptick in late card payments.

For the quarter ending June September 30, Amex reported earnings per share of $3.49, up 6% from the third quarter of 2023. It also reported revenue of $16.6 billion, up 8% from the prior year. Amex's net income was $2.5 billion, up 2% from the prior year. Earnings per share beat consensus analysts estimates of $3.29 . Revenue was in line with analyst projections of $16.65 billion, according to Seeking Alpha.

Amex's revenue set a record for the tenth consecutive quarter, and the company raised its full year EPS guidance to $13.75 -$14.05, up from $13.30 -$13.80 previously. Amex is also expecting year revenue growth that is within the annual guidance range of about 9% set at the start of the year.

"We had another strong quarter that reflects the earnings power of our business model and our continued investments for growth," said Steve Squeri, CEO of Amex, in a release. 

Amex did report an uptick in late payments, in line with signs of consumer softness that some financial institutions have also reported in the third quarter.

Investors have been looking for signs that consumer spending is declining and charge-offs and delinquencies are rising due to the spike in inflation over the past two years.Amex's U.S. consumer credit card delinquency rate rose to 1.4% in September from 1.3% in August, according to a Securities and Exchange filing earlier this week.

The company's delinquency rate was 1.3% in September 2023 and 1.55% in September 2019. (Credit card companies in recent years have listed 2019 performance as a way to measure the impact of the pandemic and subsequent recovery.)

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Amex's net charge-offs were 1.9% in September, from 2.2% in August. Net charge-offs were 1.7% in September 2023 and 2% in September 2019. Consumer loans outstanding declined to $86.8 billion in September from $87.3 billion in August.Small business delinquencies in the U.S. were 1.5% in September, up from 1.4% in August. the net write-off rate was 2.1%, down from 2.3% in August. Small business loans outstanding decreased to $29.9 billion in September 2024 from $30.1 billion in August.

Amex has aggressively developed payment and financial service products for small businesses, boosted by its acquisition of small business lender Kabbage in 2020. Managers have stressed the investment in small businesses is long-term and argued that it's agnostic to cyclical declines in economic conditions for businesses.

On the consumer side, Amex in recent quarters has suggested it is well-positioned to ride out economic weakness because its high-income customers are more insulated from prices than other card issuers and lenders.

Amex's stock has grown from about $149 per share in October 2023 to about $286 on Thursday. In a research note before Amex posted earnings this week, Jeffries affirmed its outlook for Amex as Hold, noting Amex's management has projected slower loan growth for the next few quarters and the delinquency and chargeoff rates were manageable. BTIG recently downgraded Amex to Sell from Neutral, contending that Amex's fundamentals are going to get worse despite the card company's projections of strong growth. HSBC downgraded Amex from Buy to Hold, arguing that Amex's stock price does not have a lot of room to grow even as the company posts strong earnings.

Among other payment companies, Visa reports earnings October 29 and Mastercard reports October 31.  Visa and Mastercard have both stressed that payment volume has remained strong through the past two years, though Mastercard announced layoffs shortly after its last quarterly earnings report.

Synchrony and Discover this week both reported higher revenue while cautioning on weaker consumer performance as the economy emerges from a period of high inflation and interest rates.