Amex's revenue from card fees topped $2 billion for the first time last quarter

By Emily Bary

Amex's stock falls after earnings as revenue misses but profit easily tops expectations

American Express Co. said it topped $2 billion in quarterly revenue from card fees for the first time in the second quarter, as it booked its 24th quarter in a row of of double-digit growth from such fees.

The $2 billion-plus in card-fee revenue is "a super important metric for us, because it means that people are buying into the value proposition and renewing their membership," Chief Financial Officer Christophe Le Caillec told MarketWatch.

He said that Amex (AXP) saw "a lot of stability" in spending trends during the second quarter, with particularly strong performance from U.S. customers traveling abroad, as well as from younger cardholders more generally.

Millennial and Gen-Z cardholders grew their spending 13% from a year earlier, and they use their cards more frequently than older customers, according to Le Caillec. That's partly because younger people are less likely to carry cash and more conditioned than older generations to use credit cards for smaller transaction sizes.

Amex acquired 3.3 million new cards in its latest quarter. "That's the very reason why we want to keep investing in marketing," he said. "We want to keep this flywheel going and acquire more and more customers."

Whereas Amex spent $5.2 billion on marketing last year, that number could rise to about $6 billion for 2024. Despite that increased marketing budget, the company boosted its profit outlook for the full year.

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Amex upped its full-year forecast on earnings per share to $13.30 to $13.80, up from $12.65 to $13.15 prior. The company kept intact its revenue-growth outlook of 9% to 11%.

"Based on the strong performance of our core business, we believe we can increase our marketing investments by around 15% over last year without using any of the transaction gain, while still delivering exceptional earnings results this year," Chief Executive Stephen Squeri said in a release. "As a result, we have made the decision to drop the entire gain to the bottom line."

That transaction gain refers to Amex's benefit from its sale of Accertify, which closed during the second quarter.

Overall, Amex booked $3.02 billion in net income, or $4.15 a share, up from $2.17 billion, or $2.89 a share, in the year-earlier period. On an adjusted basis that excludes 66 cents a share of transaction gains from the sale of Accertify, Amex posted $3.49 in EPS. Analysts had been projecting $3.24 in adjusted EPS.

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Revenue for the period, net of interest expense, came in at $16.3 billion, up from $15.0 billion a year before, reflecting 8% growth or 9% growth on a currency-adjusted basis. Analysts tracked by FactSet, though, expected $16.6 billion in revenue.

Shares of Amex were down about 2% in premarket action.

Billed business for the second quarter was up 5%, or 6% after currency adjustments. That marked a slowdown from the 6% growth, or 7% growth on a currency-neutral basis, that Amex saw in its first quarter.

Le Caillec flagged strong restaurant spending in the second quarter, up 8%, along with a 11% uptick in overall spending growth from U.S. cardholders abroad. That compares with 6% growth for U.S. customers in general and speaks to "the premiumness of our portfolio and and the confidence of our cardmembers in traveling overseas and spending overseas," he said. It also could reflect strength in the U.S. dollar, he noted.

See also: American Express says cardholders are buying lots of 'front of cabin' plane tickets

Amex disclosed $1.3 billion in consolidated provisions for credit losses, up from $1.2 billion a year before. The company saw higher net write-offs. but a lower reserve build relative to the prior year's period.

The company's write-off rate of 2.1% "is a good guide for what to expect in the balance of years," according to Le Caillec.

"That's what gives us confidence to say, alright, let's do what we've been doing before and keep investing, keep growing this company, because what we're doing is just working really well for us," he continued.

-Emily Bary

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07-19-24 0753ET

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