American Express (AXP, Financial) announced that its third-quarter profit exceeded Wall Street expectations, primarily due to effective cost management offsetting declining merchant fees. Revenue for the third quarter rose by 8% to $16.64 billion, slightly under the forecasted $16.67 billion, though net profit increased by 2% to $2.51 billion, surpassing analyst predictions.
Earnings per share (EPS) for the quarter reached $3.49, higher than the $3.28 predicted by analysts. This performance reflects a continued consumer preference for AmEx's rewards-rich credit cards, prompting the company to raise its full-year EPS forecast for 2024 to a range of $13.75 to $14.05, up from a prior estimate of $13.30 to $13.80.
CEO Steve Squeri highlighted that this marks the tenth consecutive quarter of record revenue for the company. AmEx shows optimism for the fourth quarter despite potential impacts from rising interest rates and economic uncertainties on discretionary spending.
Discount revenue, derived from merchant transaction fees, grew by 4% to $8.78 billion, but fell short of the expected $8.85 billion. Nevertheless, AmEx exceeded profit expectations thanks to its customers' creditworthiness, which helped maintain low credit loss provisions. Total expenses for the quarter were $12.08 billion, less than the anticipated $12.74 billion, with credit loss provisions totaling $1.4 billion, up from $1.2 billion the previous year.
American Express, renowned for catering to high-spending travelers and hospitality needs, reports strong dining demand according to its Resy CEO. Since the start of the year, AmEx has completed 40 product updates to enhance its value proposition, aligning with customers' financial and lifestyle needs.
CEO Steve Squeri expressed confidence in the company's investment direction, emphasizing robust early performance following the product updates. At the time of reporting, American Express shares were down 2.97% in pre-market trading.
