In his recent appearance on Trading 360 with Nicole Petallides, Andrew Wang, Managing Partner at Runnymede Capital Management, shared his analysis of American Express’s (AXP) fourth-quarter earnings report. Despite a slight dip in pre-market trading, Wang described the results as positive for investors, emphasizing strong growth across all segments and a notable uptick in spending by Millennials and Gen Z.
Highlights from American Express’s Earnings Report
American Express (AXP) reported a solid Q4, with revenue of $17.18 billion (+8.7% YoY) and earnings per share (EPS) of $3.04, slightly beating expectations. Wang noted the key takeaways from the report:
1. Growth Across All Segments
The quarter saw billed business growth of 8% YoY, driven by strong consumer spending (+9% YoY) and gains in international markets (+15% YoY FX-adjusted). Wang highlighted the resilience of higher-income consumers, who continue to spend heavily on travel and dining, even amidst broader macroeconomic concerns.
Of particular note was the 16% growth in billed business from Millennials and Gen Z, significantly outpacing older generations (Gen X at +7% and Baby Boomers at +4%). Wang pointed to this younger demographic as a key driver of future growth, particularly as American Express continues to expand its offerings in travel rewards and lifestyle benefits.
2. Record Card Fee Revenue
American Express achieved record-high card fee revenue of $2.25 billion, an 18% YoY increase, reflecting strong engagement with its premium offerings. According to Wang, this indicates that affluent customers see value in AmEx’s travel and dining benefits, a core part of the company’s value proposition.
3. Improved Credit Metrics and Resilient Spending
Wang also highlighted American Express’s strong credit metrics, with net charge-offs at 2.10% (better than the 2.36% consensus). Lower-than-expected provisions for credit losses further offset the impact of rising expenses, underscoring the creditworthiness of AmEx’s customer base.
Risks to Monitor
1. Rising Expenses and Margin Pressures
Operating expenses rose 11% YoY to $13.13 billion, driven by higher marketing, rewards, and operational costs. Wang noted that this expense growth outpaced revenue growth, raising concerns about margin pressures. Investors were cautious about the increased marketing spend required to achieve revenue targets, which contributed to the stock’s slight decline.
2. Softer 2025 Guidance
American Express provided 2025 guidance of 8%-10% revenue growth and EPS of $15.00-$15.50, slightly below consensus estimates of $15.27. While the guidance reflects stability, Wang noted that the midpoint suggests slower earnings growth compared to recent years, which could weigh on investor sentiment.
Outlook
Despite near-term concerns about rising expenses, Wang expressed optimism about American Express’s long-term prospects. With plans to increase its quarterly dividend by 17% to $0.82 per share, the company continues to deliver value to shareholders. Additionally, Wang pointed to potential benefits from favorable policy changes, such as tax cuts and deregulation, under the new administration.
For investors, American Express’s strong brand, affluent customer base, and focus on high-growth demographics like Millennials and Gen Z make it a compelling long-term opportunity. As Wang summarized, “The elevated expenses will keep investors focused on execution in the coming quarters, but the continued growth in spending, particularly among younger generations, bodes well for the future of the company.”
Another Stock to Watch:
Wang also flagged ALLY Financial (ALLY) as one of the largest auto finance companies in the U.S. Ally stands to benefit from favorable trends in the used car market, as reflected in the rising Manheim Index. Improving credit quality and increased origination activity suggest upside potential, especially with companies like Capital One highlighting strength in the auto loan space.
