American Express company AXP Shares traded 3.1% lower on Friday morning after the credit card and digital payments company reported third-quarter earnings and sales growth on Thursday.
What happened? The New York-based company reported adjusted earnings per share of $2.47 on sales of $13.6 billion for the third quarter. Both numbers beat analyst consensus estimates of $2.40 and $13.5 billion, respectively.
Revenue increased 24% year over year.
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Why it matters: Despite the top and bottom line beats, shares of American Express drifted lower on Friday as investors focused on slightly disappointing network volume and higher-than-expected provisions.
On Friday, Bank of America analyst Mihir Bhatia said American Express may fall victim to high expectations, but the fundamentals of the company’s core business remain strong.
“Expectations for AXP had risen following major bank and airline results and with AXP stock MTD up 595 basis points and outperforming the S&P 500 by 363 basis points, we believe the market is looking for more strength in AXP stocks. settlements and less reserving,” Bhatia said.
Total provisions were $778 million, beating Bhatia’s estimate of $562 million.
Business cleared increased 24% on a constant currency basis, and American Express added 3.3 million new proprietary cardholders in the quarter, including a record number of new US consumer and small business Platinum cardholders.
Looking ahead, America Express also forecast revenue growth in 2023 above its long-term target of 10%. American Express also reiterated its full-year revenue growth guidance of between 23% and 25%, but now expects full-year EPS to come in “above the original range of $9.25 to $9.65.”
Bank of America has a buy rating and a price target of $172 on American Express.
Related link: American Express analysts expect the economy to slow down slightly in 2023 as the US and global economies enter recession
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