What American Express earnings reveal about US consumer spending and economic trends

American Express Company (NYSE: AXP) earnings this morning suggest the US consumer is in no mood to slam the breaks on spending – at least on travel and entertainment.

What’s even more interesting is that AMEX is now generating a bigger chunk of its business from the younger generations.

Millennials and the Gen Z were behind 60% of the new card acquisitions in the fourth quarter, as per the financial services giant’s release on Friday.

Billed business – or total spending that’s going through the American Express network came in up a better-than-expected 8% in Q4, further invalidating the broader narrative that the high-end consumer was slowing down.  

American Express stock is currently trading about 70% above the price at which it started 2024.

What weighed on AMEX earnings in Q4?

American Express was unable to meaningfully beat Street estimates for per-share earnings in its fiscal fourth quarter primarily because “it spent more on marketing to engage its customers,” argued UBS analyst Erica Najarian in a CNBC interview today.  

On Friday, the credit card company issued better-than-expected guidance for full-year revenue growth – but she expects AMEX to go even beyond that if small businesses pick up and start to expand their businesses in 2025.  

A planned increase of 17% in quarterly dividend to 82 cents per share keeps American Express stock attractive despite its massive run to the upside last year.

AMEX earnings arrive only days after the multinational agreed to pay $138 million to settle a sales and marketing investigation.

American Express may make new acquisitions in 2025

Erica Najarian is bullish on the $400 million acquisition of Tock that American Express completed in the final quarter of last year.

In 2025, she expects the company to remain in search of potential deals to further hook its clientele to its ecosystem.

She refrained from commenting on who could be AMEX’s next target but said it’ll fully commit to pursue those kinds to deals to “keep you sticky” and prevent you from moving to Capital One Venture X or the Chase Saphire Reserve credit card.

Note that American Express will celebrate its 175^th anniversary in March of 2025.

American Express stock is relatively inexpensive to own

American Express saw a slight decline in consolidated provisions for credit losses in its fourth financial quarter to $1.3 billion.

Shares of the New York based company are currently going for 23.22 times its trailing 12 months earnings – compared to 34 times for Visa and more than 40 times for Mastercard.

So, AMEX stock, despite its ongoing rally, is not particularly expensive to own at writing.

American Express shares sit comfortably above their 200-day MA and a strong support at the $288 level that further strengthens the case of loading up on them on Friday.  

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