Can AXP Keep Its ROE Shining While Expenses Climb the Ladder?

American Express Company AXP has been a standout in the payments world for consistently delivering a high return on equity (ROE), benefiting from its premium customer base, robust fee income and a closed-loop network that allows for better control over relationships with both cardholders and merchants. In the third quarter of 2025, it delivered an ROE of 35.9%, up from 33.9% a year ago.

However, expenses continue to climb due to increased spending on rewards, services, marketing and business development, as the company focuses more on growth, brand visibility, customer engagement, retention and digital expansion. Total expenses rose 10% in 2023 and 6% in 2024, followed by a 10% year-over-year increase in the third quarter of 2025. It introduced an innovative digital advertising platform, Amex Ads, aimed at helping brands engage with American Express Card Members.

American Express is increasingly leveraging AI, machine learning, fraud detection and personalized offers to enhance customer experience and optimize operations. These initiatives, combined with strong execution across business segments, help the company manage rising costs while supporting revenue growth.

AXP’s ROE resilience depends on balancing strategic investments with disciplined credit management. By focusing on innovation, streamlining operations and keeping customers engaged, the company is well-positioned to sustain its strong returns, even as expenses climb. It returned $2.9 billion to its shareholders in the form of share repurchases and dividends.

How Are Competitors Faring?

Some of AXP’s competitors in the payments solutions space are Visa Inc. V and Mastercard Incorporated MA.

Visa is facing cost pressure. Its adjusted operating expenses rose 13% year over year in the fourth quarter of fiscal 2025. However, Visa rewarded $6.1 billion to its shareholders via share buybacks of $4.9 billion and dividends of $1.2 billion in the same quarter.

Mastercard bought back 5.8 million shares for $3.3 billion and paid a dividend of $687 million in the third quarter of 2025. However, MA’s adjusted operating expenses rose 15% year over year in the same quarter due to acquisitions and general and administrative expenses.

American Express’ Price Performance, Valuation & Estimates

Shares of AXP have risen 21.5% in the year-to-date period against the industry’s decline of 5.7%.

From a valuation standpoint, American Express trades at a forward price-to-earnings ratio of 20.75X, down from the industry average of 23.56X. AXP carries a Value Score of C.

The Zacks Consensus Estimate for American Express’ 2025 earnings is pegged at $15.43 per share, implying a 15.6% jump from the year-ago period.

AXP currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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