American Express Sees Record Revenue Despite Economic Concerns

American Express's second-quarter revenue rose 9% to a record $16.33 billion, driven by affluent customer spending. Despite this, results fell short of expectations, causing shares to drop 4.4%. Concerns arose due to slowing spending growth and wage stagnation. The company raised its 2024 earnings forecast and plans to increase marketing.

American Express's second-quarter revenue surged 9% to an unprecedented $16.33 billion, buoyed by robust spending from its affluent customers. Nevertheless, the figures fell short of market expectations, prompting a 4.4% drop in the company's stock. Known for catering to high-end cardholders, AmEx has been somewhat shielded from broader economic weaknesses, even as some rival lenders point to lukewarm loan demand amid climbing borrowing costs.

Investor unease grew amid signs of slowing spending growth compared to the previous quarter, compounded by data indicating a tapering in wage growth, which could hinder discretionary spending. Billed business, an indicator of AmEx card spending, increased by 6% year-on-year in the second quarter, down from a 7% rise in the first quarter.

Despite these concerns, American Express raised its 2024 earnings per share forecast to a range of $13.30 to $13.80, up from the earlier prediction of $12.65 to $13.15. Citigroup analyst Keith Horowitz expressed confidence in the company's management to control expenses and meet the updated EPS target. However, he warned that the revenue shortfall might pressure the stock.

CEO Stephen Squeri emphasized that the company would increase its marketing efforts by 15% this year, not due to anticipated spending slowdowns, but to attract new cardholders and capture market share. The company's profit for the quarter was $3.02 billion, or $4.15 per share, marking a 39% increase from the previous year. Excluding a one-time gain, earnings were $3.49 per share, surpassing analysts' estimates of $3.24 per share according to LSEG data. Nonetheless, quarterly revenue of $16.33 billion fell short of the LSEG estimate of $16.59 billion.