American Express Co (NYSE: AXP) reported better-than-anticipated fiscal 2022 third-quarter earnings and revenues. The financial institution also upwardly amended its FY 2022 outlook against the backdrop of a surge in consumer spending. The credit card provider also increased the cash reserve for likely defaults. This spooked the markets, which resorted to selling the stock in the final trading session of last week. Following the results, the stock of American Express lost 1.67%, or $2.38, to close at $140.04.
The New York-based company reported third-quarter revenues of $13.56 billion, an increase of 24.10% from $10.93 billion in the comparable period last year. The increase was mainly driven by a rise in Card Member spending.
For the latest quarter, which ended September 30, 2022, American Express recorded a net income of $1.88 billion, or $2.47 per share, compared with $1.83 billion, or $2.27 per share, in the quarter that ended September 30, 2021.
Analysts surveyed by Thomson Reuters had anticipated the company would report earnings of $2.41 per share on revenues of $13.58 billion.
Commenting on the quarterly results, Stephen Squeri, Chairman and CEO, said, “The strength of our results, combined with the many opportunities we see for our business, reinforces our confidence in our ability to achieve our long-term growth plan aspirations.”
Segment wise,
- US Consumer Services revenues surged 27% y-o-y to $6.20 billion.
- Commercial Services revenues were $3.50 billion, an increase of 23% from last year.
- International Card Services revenues rose by 19% y-o-y to $2.30 billion.
- Global Merchant and Network Services revenues were $1.70 billion, up 26% on a y-o-y basis.
Overall spending grew by 21%, led by an increase in both Goods & Services and Travel & Entertainment spending, which rose by 57% on a y-o-y basis. Net interest income grew by 29% y-o-y to $2.58 billion, while non-interest income increased by 23% to $10.98 billion in the same period.
The company revealed that provisions for credit losses were $778 million in 3Q 2022, compared with a benefit of $191 million in 3Q 2021. The reported figure reflects a reserve build of $387 million. Analysts anticipated the firm to set aside $604.10 million for credit losses.
Consolidated expenses rose by 19% to $10.30 billion in 3Q 2022, from $8.70 billion in 3Q 2021. The reported figure reflects an increase in customer engagement fees, mainly due to a 19% rise in network volumes.
Looking ahead, American Express reaffirmed its FY 2022 revenue growth rate of 23% to 25%. The company now anticipates recording earnings above its prior guidance range of between $9.25 and $9.65 per share.
Wall Street analysts are forecasting earnings of $9.91 per share on revenue growth of 24.70% to $52.83 billion for FY 2022.
American Express reported an addition of 3.30 million proprietary cards in the September quarter. Additionally, there were record-high sales of US Business Platinum cards, and US Consumer Platinum and Gold cards.
The quarterly earnings beat and upward revision of the FY 2022 outlook are expected to turn the stock of American Express slightly bullish in the days ahead.
The historical price chart indicates that the stock of AmEx is rising after forming a double bottom pattern at 135. The next resistance is anticipated at around 155. Additionally, the stochastic oscillator is rising towards the bullish zone. Therefore, we anticipate the share price to appreciate in the days ahead.
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