American Express’s robust financial performance in Q1 2024, marked by an 11% year-over-year increase in revenue to $15.8 billion and a 39% rise in EPS to $3.33, was primarily driven by strong spending growth from international cardholders and successful new card acquisitions. Here is a complete analysis of the American Express Q1 2024 report.
Despite a softer spending trend among US small and medium-sized enterprises (SMEs), American Express has projected a revenue growth rate of 9% to 11% and an EPS range between $12.65 and $13.15.
The strong quarterly results were maintained by increased net interest income and growth in the customer base of Millennials and Gen-Z. However, rising customer engagement and compensation expenses partially offset these gains.
American Express Q1 2024 Report Key Takeaways
- Robust Financial Growth: American Express achieved an 11% revenue increase, totaling $15.8 billion in Q1 2024, driven by strong international spending and successful new card acquisitions, alongside a notable 39% rise in EPS.
- Increased Profits and Strong Performance Metrics: Profits soared by 34% to $2.44 billion in Q1, surpassing expectations. EPS hit $3.33, with revenue reaching $15.8 billion, reflecting robust growth in cardholder spending.
- Segmental Performance Highlights: Notable growth was observed across segments, with the US Consumer Services segment seeing a 43% income increase. Although Commercial and International Services slightly missed estimates, Global Merchant Services saw a 15% increase in pre-tax net income.
- Strategic Outlook and Confidence in Future Growth: American Express reaffirmed its full-year guidance, projecting revenue growth of 9% to 11% and an EPS range of $12.65 to $13.15 for 2024. This reflects confidence in strategic initiatives to attract high-quality customers and engage younger demographics, ensuring continued growth in Card Member spending.
American Express Reports 34% Increase in First-Quarter Profits
Credit card giant American Express reported a 34% increase in first-quarter profits, driven by higher spending from cardholders and an increase in customers maintaining balances on their cards. The New York-based company announced a profit of $2.44 billion in the first three months of the year, surpassing Wall Street’s expectations.
The results exceeded expectations, with EPS reaching $3.33 and revenue hitting $15.8 billion, an 11% year-over-year (YOY) increase. Higher net interest revenue and more cardholder spending were the main drivers of this growth. Increased consumer spending drove network volumes to $419 billion in the first quarter, a 5% YOY rise. The total interest income rose 31% from the prior year to $5.8 billion. On the other hand, consolidated provisions for credit losses increased to $1.3 billion from $1.1 billion in the previous year due to a decrease in net reserve build of $320 million to $148 million, which was partly offset by higher net write-offs.
At $11.4 billion, consolidated expenses rose 3% year over year. Increased cardholder spending, utilization of travel-related benefits, and marketing expenditures were the primary causes of this increase in customer engagement costs. A $196 million advantage from improved models for projecting future redemptions of membership rewards somewhat mitigated this. Millennials and Gen Z consumers acquired more than 60% of new customer accounts.
Chairman and CEO Stephen Squeri noted that 2024 has begun on a strong note. The company’s first-quarter results reflected positive trends seen in recent years, including an 11% increase in revenue and a 39% increase in EPS compared to the previous year.
She went on to say that they have significantly increased engagement among premium consumers as a result of their continuous investments in value propositions, marketing, brand, and technological capabilities. When adjusted for foreign exchange, the total amount spent by card members climbed by 7%, with US consumer card members spending 8% more than they did a year ago, and the International Card Services section spending rose by 13%.
She also emphasized that the business still draws in high-spending, high-quality credit clients. The number of new card acquisitions increased to 3.4 million during the quarter, with over 70% of new accounts coming from fee-based products. Around 60% of newly opened consumer accounts worldwide are attributed to Gen Z and Millennial demand, which is still high. The business continues to have the strongest credit metrics in its class.
Segmental Performances Overview
- US Consumer Service:
In the Q1 report, the US Consumer Services segment reported a pre-tax income of $1.6 billion, marking a 43% increase compared to last year. This exceeded expectations of $1.3 billion. Total revenues, net of interest expenses, grew 14% YOY, reaching $7.5 billion, driven by higher net interest income and increased Card Member spending.
- Commercial Services:
This segment recorded a pre-tax income of $878 million, up 39% YOY but falling short of estimates by 6.1%. Total revenues net of interest expenses amounted to $3.8 billion, showing an 8% increase from the previous year due to growth in net interest income. The figure surpassed the consensus estimate of $3.7 billion.
- International Card Services:
This segment’s pre-tax income increased by 33% YOY to $252 million. Total revenues net of interest expenses rose 8% to $2.7 billion, missing the consensus estimate of $2.8 billion. The growth can be attributed to increased Card Member spending and rising card fee revenues.
- Global Merchant and Network Services:
This segment saw a pre-tax net income of $1 billion in the first quarter, marking a 15% increase year over year and surpassing estimates of $958 million. Total revenues net of interest expenses rose 7% year over year to $1.9 billion due to growth in merchant-related revenues.
What Lies Ahead for American Express?
American Express’s Q1 2024 results demonstrate its ability to sustain solid financial performance amidst a changing regulatory landscape. Key metrics for investors to monitor include net income growth, total revenue, and credit loss provisions, alongside the company’s ability to manage expenses and maintain a robust capital position.
Furthermore, the impact of regulatory changes, particularly related to AML/CFT laws and credit card late fees, is crucial to watch. The sale of Accertify and ongoing investments in customer acquisition and engagement will also significantly influence American Express’s performance in the upcoming quarters.
American Express has reiterated its full-year 2024 outlook, forecasting revenue growth between 9% and 11%, with earnings per share anticipated to fall between $12.65 and $13.15.
This demonstrates the company’s faith in its business plan and highlights its ability to keep up the momentum with smart marketing, technology, and value-adding initiatives. The company’s effective approach to drawing in high-caliber clients and interacting with younger audiences is anticipated to spur further expansion in Card Member expenditure, giving the stakeholders hope for the company’s future.
About American Express
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American Express Company, with its subsidiaries, functions as an integrated payments provider across a diverse global market, including the United States, the Middle East, Africa, Europe, Australia, the Asia Pacific, Latin America, New Zealand, the Caribbean, Canada, and beyond. Its operations are divided into four key segments: Commercial Services, US Consumer Services, Global Merchant and Network Services, and International Card Services. The company offers a variety of products and services, such as credit cards, charge cards, banking, and other payment and financing options.
In addition, it provides merchants with a comprehensive suite of services, including acquisition, processing, servicing, settlement, point-of-sale marketing, information products and services, fraud prevention services, and the design and implementation of customer loyalty programs. Furthermore, it operates Centurion Lounges in airports worldwide. American Express markets its products to consumers, mid-sized companies, and large corporations through mobile and online applications, direct mail, customer referral programs, affiliate marketing, third-party providers, business partners, in-house sales teams, and direct response advertising. The company, established in 1850, is headquartered in New York.
Conclusion
American Express’s strong performance in the first quarter of 2024 demonstrates its resilience and strategic capabilities in navigating dynamic market conditions. The company’s revenue has increased by 11%, and earnings per share have substantially risen, surpassing expectations. This growth has been fueled by greater spending from international cardholders and successful new card acquisitions. Despite ongoing challenges such as softer spending trends among US SMEs, the company remains confident in sustaining growth momentum, as evidenced by the reaffirmation of its full-year guidance.
The company’s quarterly results showed strong growth, mainly due to an increase in net interest income and an expanding customer base, with a particular focus on Millennials and Gen Z. However, the rise in customer engagement and compensation expenses needs to be carefully considered for ongoing optimization. Going forward, investors should keep a close eye on key metrics, regulatory impacts, and strategic initiatives to determine the company’s direction. American Express’s dedication to strategic investments and attracting high-quality customers position it for continued success in the constantly evolving payments landscape.
