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American Express Co Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- Revenue guidance reflects the balance between the spend environment and the acceleration in spend growth in Q4.
- The company saw continued high Card Member retention, best-in-class credit performance, and disciplined expense management.
- The company exited the year with increased momentum as Q4 billings growth accelerated to 8% overall, driven by robust holiday spend.
- The company's US small- and medium-sized enterprise customer base continue to grow with strong new card acquisitions throughout the year.
- Marketing expenses ended the year at $6 billion, up 16% for the full year as the company invested at elevated levels based on the attractive growth opportunities it saw.
- The company faced uncertainty in the environment, whether in tax policy, interest rates, or currency movements.
- The company expects 2025 revenue growth of 8% to 10% and EPS of $15 to $15.50 or a 12% to 16% increase over 2024 adjusted for the Accertify Gain.
- The company expects a modest increase in marketing expense for 2025 due to the significant increase of the investment pool in 2024.
- The company expects billings to be similar to the fourth quarter number in 2025.
- The company expects to come in at the higher end of the revenue range if spend growth continues at the elevated Q4 level throughout 2025.
Q&A Highlights from American Express Co Earnings Call Q4 2024
- Analyst asked about potential headwinds to revenue growth and the impact of GDP on card acquisitions.
- Stephen Squeri, CEO of American Express, explained that the company's revenue growth is largely dependent on billings, which were strong in Q4 and continued into 2025. He also mentioned that card fees will continue to grow in the mid-teens to low-teens, and NII will continue to grow at a lower rate than in the first two quarters of 2024.
- Stephen Squeri, CEO of American Express, explained that the company's revenue growth is largely dependent on billings, which were strong in Q4 and continued into 2025. He also mentioned that card fees will continue to grow in the mid-teens to low-teens, and NII will continue to grow at a lower rate than in the first two quarters of 2024.
- Analyst asked about the upside to revenues and the potential impact on the EPS range.
- Stephen Squeri explained that the company's EPS range is flexible, and they have the option to reinvest in the business or return money to shareholders. He also mentioned that if the company has a year like 2024, they could exceed the EPS range.
- Stephen Squeri explained that the company's EPS range is flexible, and they have the option to reinvest in the business or return money to shareholders. He also mentioned that if the company has a year like 2024, they could exceed the EPS range.
- Analyst asked about the impact of billings on revenue growth and the sustainability of the holiday shopping season.
- Christophe Le Caillec, CFO of American Express, explained that billings were strong in Q4, with consumer billings up 2 points, organic spend lift in SME, and international billings performing well. He also mentioned that the holiday shopping season was strong for the company, and they are looking at whether it will expand into 2025.
- Christophe Le Caillec, CFO of American Express, explained that billings were strong in Q4, with consumer billings up 2 points, organic spend lift in SME, and international billings performing well. He also mentioned that the holiday shopping season was strong for the company, and they are looking at whether it will expand into 2025.
- Analyst asked about the factors that will drive billing strength in 2025, specifically the split between new cards acquired and the 6.5% year-over-year increase.
- Christophe Le Caillec explained that the company invested heavily in 2024 and acquired 13 million new cards, a record for the company. He stated that the company expects a modest increase in marketing expenses in 2025, and that the billing growth will come from a combination of recently acquired Card Members, organic growth, and attrition. He noted that organic growth is the most difficult to predict and that the company has seen volatility in this area, but that it typically accounts for 7% of the billing growth.
- Christophe Le Caillec explained that the company invested heavily in 2024 and acquired 13 million new cards, a record for the company. He stated that the company expects a modest increase in marketing expenses in 2025, and that the billing growth will come from a combination of recently acquired Card Members, organic growth, and attrition. He noted that organic growth is the most difficult to predict and that the company has seen volatility in this area, but that it typically accounts for 7% of the billing growth.
- Analyst asked about the company's approach to forecasting billing growth and how it has changed over time.
- Stephen J. Squeri explained that the company has seen rising confidence in both consumers and small businesses, with international markets being particularly strong. He noted that the company has conducted a survey of small businesses and found that sentiment is high, and that this has contributed to organic growth. He also mentioned that the company is managing its expectations based on what it sees in the market, and that it will adjust its plans accordingly.
- Stephen J. Squeri explained that the company has seen rising confidence in both consumers and small businesses, with international markets being particularly strong. He noted that the company has conducted a survey of small businesses and found that sentiment is high, and that this has contributed to organic growth. He also mentioned that the company is managing its expectations based on what it sees in the market, and that it will adjust its plans accordingly.
- Analyst asked about Delta's co-brand card growth and how it compares to American Express's thought process on the travel space.
- Stephen J. Squeri, CEO of American Express, stated that the company aligns closely with Delta and their expectations for 2025, but also noted that the Delta book includes spending on everything else by American Express Card Members, not just Delta. He further mentioned that the company is happy to see an increase in remuneration from Delta, as it indicates an increase in spending, and the company's piece of the pie.
- Stephen J. Squeri, CEO of American Express, stated that the company aligns closely with Delta and their expectations for 2025, but also noted that the Delta book includes spending on everything else by American Express Card Members, not just Delta. He further mentioned that the company is happy to see an increase in remuneration from Delta, as it indicates an increase in spending, and the company's piece of the pie.
- Analyst asked about the company's expectation of a modest increase in its performance.
- Stephen J. Squeri, CEO of American Express, stated that the company's performance has outperformed its expectations for stability this year, and it is expecting a modest increase from here. He mentioned that the company is constantly looking to refresh products on an ongoing basis and will let the market speculate on what they come out with.
- Stephen J. Squeri, CEO of American Express, stated that the company's performance has outperformed its expectations for stability this year, and it is expecting a modest increase from here. He mentioned that the company is constantly looking to refresh products on an ongoing basis and will let the market speculate on what they come out with.
- Analyst asked about the credit metrics and why the company might be expecting a modest increase from the current level.
- Christophe Le Caillec, Chief Financial Officer of American Express, stated that the company is still materially below where it was pre-COVID, unlike most of its competitors. He further mentioned that the company's strategy of focusing on premium products has been successful in attracting low-risk customers, which has resulted in good credit performance. He expects the credit metrics to trend up a little bit, but remain best-in-class, due to the company's acquisition of customers and the seasoning of those vintages.
- Christophe Le Caillec, Chief Financial Officer of American Express, stated that the company is still materially below where it was pre-COVID, unlike most of its competitors. He further mentioned that the company's strategy of focusing on premium products has been successful in attracting low-risk customers, which has resulted in good credit performance. He expects the credit metrics to trend up a little bit, but remain best-in-class, due to the company's acquisition of customers and the seasoning of those vintages.
- Analyst asked about the acceleration in the company's SME segment and its plans for refresh.
- The company's SME segment has been acquiring the same amount of customers and experiencing the same level of attrition. Organic spending has not yet returned to pre-COVID levels, but the company is seeing a turnaround in organic spending and expects to achieve a 3% organic lift, which would make SME a more significant contributor to billings. The company's focus is on organic growth, and it believes that small business confidence is a key driver of success.
- The company's SME segment has been acquiring the same amount of customers and experiencing the same level of attrition. Organic spending has not yet returned to pre-COVID levels, but the company is seeing a turnaround in organic spending and expects to achieve a 3% organic lift, which would make SME a more significant contributor to billings. The company's focus is on organic growth, and it believes that small business confidence is a key driver of success.
- Analyst asked about the drivers of merchant acceptance and the sustainability of growth in international markets.
- The company has seen rapid growth in merchant acceptance internationally, with a focus on key markets. It has acquired millions of merchants and has achieved 80% LIF coverage in the top five markets. The company also has a strong focus on card acquisition, with opportunities for growth in international markets. The company expects double-digit billings to continue into the foreseeable future, supported by its strong performance in international markets and the potential for growth in SME and consumer segments.
- The company has seen rapid growth in merchant acceptance internationally, with a focus on key markets. It has acquired millions of merchants and has achieved 80% LIF coverage in the top five markets. The company also has a strong focus on card acquisition, with opportunities for growth in international markets. The company expects double-digit billings to continue into the foreseeable future, supported by its strong performance in international markets and the potential for growth in SME and consumer segments.
- Analyst asked about competition from fintechs and how it has been evolving.
- Stephen J. Squeri, CEO of American Express, stated that they have not seen any inroads from fintechs on the consumer side and that their card acquisition from a consumer perspective was at record levels. He also mentioned that they are aware of the technology integrated with card on the SME side and will take appropriate steps to address it.
- Stephen J. Squeri, CEO of American Express, stated that they have not seen any inroads from fintechs on the consumer side and that their card acquisition from a consumer perspective was at record levels. He also mentioned that they are aware of the technology integrated with card on the SME side and will take appropriate steps to address it.
