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Jan. 25, 2022, 11:34 a.m. EST

American Express stock rockets toward best day in more than a year amid ‘record’ spending

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By Emily Bary

American Express Co. easily topped revenue and earnings expectations for the fourth quarter Tuesday as it cited record levels of spending through its cards.

Shares were up 8.8% in morning trading and on track for their largest single-day percentage gain since Nov. 9, 2020, when the stock rose 21.4%.

The company reported fourth-quarter net income of $1.72 billion, or $2.18 a share, up from $1.44 billion, or $1.76 a share, in the year-prior quarter. Analysts tracked by FactSet were modeling $1.86 a share in earnings.

American Express /zigman2/quotes/203805826/composite AXP -3.55% saw revenue net of interest expense increase to $12.15 billion from $9.35 billion. The company’s total came in ahead of the FactSet consensus, which called for $11.5 billion.

Chief Executive Stephen Squeri said in a release that the company saw “record levels” of spending on its cards. AmEx was also able to retain customers at higher levels than it did prior to the pandemic, per the release.

The company is seeing particular traction with younger spenders. Looking at the U.S., AmEx saw fourth-quarter millennial and Gen-Z spending levels climb 50% above where they were in the fourth quarter of 2019, Chief Financial Officer Jeff Campbell told MarketWatch.

That represents “far more growth than with older-demographic categories” and “bodes really well for the future,” Campbell said.

AmEx has made a push to capture “broader and broader aspects of lifestyle” beyond “strong travel” benefits with its card-rewards offerings, Campbell continued. He cited dining, entertainment, wellness, and other benefits.

Overall travel and entertainment spending was at 82% of 2019 levels in the fourth quarter, and while AmEx has seen recoveries in spending among U.S. consumer and the general small- and medium-sized business category, larger corporations have been much slower to resume such spending.

AmEx called out fourth-quarter large and global corporate travel and entertainment spending as being at 36% of comparable 2019 levels in its earnings presentation.

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The company expects to boost its quarterly dividend to 52 cents a share from 43 cents a share beginning with the first quarter of 2022, AmEx said in its release. The dividend increase is subject to board approval.

For the full year, AmEx anticipates revenue growth of 18% to 20% as well as earnings per share of $9.25 to $9.65. The company had previously said as recently as December that it was expecting to drive 2022 EPS at the high end of the $8.95 to $9.25 range that it had outlined prior to the start of the pandemic in 2020, so the new target is more optimistic.

Still, analysts tracked by FactSet were projecting $9.70 a share in earnings for fiscal 2022.

In the long run, the company expects to generate annual revenue growth greater than 10% and EPS growth in mid-teens percentages “as the economy reaches a steady state,” Squeri said in the release.

Campbell added in his conversation with MarketWatch that the longer-term growth targets are ahead of AmEx’s prepandemic trends. AmEx is confident in its ability to achieve the goals in its new growth plan in part because of its emphasis on attracting younger customers and small- and medium-sized businesses.

“Our learnings from the pandemic is that those were the right places to focus on,” he said.

Shares of American Express have dropped about 5% over the past three months, roughly matching losses for the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -3.57% over that span.

/zigman2/quotes/203805826/composite
US : U.S.: NYSE
$ 156.10
-5.75 -3.55%
Volume: 2.70M
May 18, 2022 4:03p
P/E Ratio
15.64
Dividend Yield
1.33%
Market Cap
$121.88 billion
Rev. per Employee
$723,328
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
31,490.07
-1,165 -3.57%
Volume: 465.06M
May 18, 2022 4:56p
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