American Express enjoyed a notable 12% rise in profits, driven by stronger-than-expected holiday spending from affluent consumers. The company’s growth exceeded analysts’ projections, and American Express executives are optimistic that this positive trend will continue into the new year.
Holiday Spending Fuels Strong Growth
In the fourth quarter, Amex reported an 8% increase in billed business, reaching $408.4 billion. This increase in transaction volume came from the use of credit cards and other products issued by the firm. Despite this growth, Amex’ net income for the fourth quarter came in at $2.17 billion, or $3.04 per share, slightly below analysts’ forecasts.
Steve Squeri, the CEO of American Express, highlighted the company’s positive year-end results, pointing out that the 8% billings growth was fueled by higher consumer and commercial spending during the holiday season. He also emphasized the company’s commitment to strong credit management and careful expense control throughout the year.
“We finished the year with strong momentum, driven by increased billings growth and greater spending across consumer and business customers during the holidays,” Squeri stated. He added that Amex maintained its best-in-class credit performance while managing expenses efficiently.
Looking ahead, American Express expects full-year revenue growth to range between 8% and 10%. This growth is directly tied to the level of spending on Amex products, and if spending trends continue as they did in the fourth quarter, the company is likely to achieve the high end of its revenue forecast.
American Express Stock and Economic Outlook
While American Express shares dropped by 1.4% to $321.32 in early trading, the company’s stock has seen impressive gains, increasing by 73% over the past year.
Squeri commented on the broader U.S. economic climate, noting that there is currently a sense of euphoria in the market. He attributed part of this optimism to the strength of the U.S. dollar and suggested that it could encourage more Americans to travel abroad in 2025, which could further benefit American Express.
Strategic Investments to Enhance Customer Offerings
To meet the needs of its high-spending customers, Amex has been investing in its travel and hospitality offerings. In June, American Express acquired Tock, a platform focused on restaurants and events, further strengthening its position in the premium dining and event space. Additionally, Amex made updates to its Gold card in July, adding a $100 annual statement credit for dining at Resy-linked restaurants in the U.S.
In another significant development, Amex’ partnership with Delta Air Lines continued to grow. Delta announced in November that the payments it receives from Amex to fund loyalty points are on track to reach $10 billion annually in the long term, providing a major revenue stream for both companies.
Addressing Legal Challenges and Strengthening Compliance
Recently, American Express revealed it would pay around $230 million to resolve ongoing federal investigations into its sales practices, particularly regarding products aimed at small business owners. In response, American Express has decided to discontinue the disputed products, take action against employees involved, and bolster its compliance programs to ensure such issues do not recur.
Despite these challenges, the company has maintained strong credit metrics. According to American Express’s investor presentation, 30-day delinquency rates have stayed flat compared to the previous year, while net write-off rates have dropped slightly. These figures suggest that American Express is managing risk well, with both metrics remaining lower than pre-pandemic levels.
Optimistic Outlook for Consumer Spending
Looking ahead, American Express remains optimistic about consumer confidence, which is showing signs of increasing. CEO Steve Squeri believes this confidence will translate into more spending in the future. “Consumer confidence is rising, and we expect that to drive further spending,” Squeri explained.
With American consumers continuing to show resilience and American Express investing in customer loyalty, the company appears well-positioned for continued success. Whether through premium travel and dining experiences or addressing legal issues with transparency, Amex is focused on remaining a leader in the financial services industry.
In Conclusion
The results from American Express in 2024 reflect a company riding high on strong consumer spending, sound credit strategies, and strategic investments in premium services. While it faces some regulatory challenges, American Express remains a key player in the financial space. With an optimistic economic outlook and a focus on meeting customer needs, American Express is poised for sustained growth in the coming years.
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