American Express (NYSE:AXP) shares declined more than 2% in premarket trading on Friday after the financial services company reported second-quarter earnings that exceeded analyst expectations, while revenue came in slightly below market forecasts.
Although the company delivered higher profits and raised its full-year revenue growth outlook, investors focused on the modest revenue miss following the quarterly release.
Profit tops expectations
American Express reported diluted earnings of $4.53 per share for the second quarter, surpassing Wall Street’s consensus estimate of $4.40 per share.
Revenue, excluding interest expense, totaled $19.64 billion, narrowly missing analysts’ expectations of $19.69 billion.
Net income increased to $3.1 billion from $2.9 billion in the same period last year, while revenue rose 10% year-on-year.
The company said revenue growth was driven by increased Card Member spending, higher net interest income supported by larger card balances and continued strength in card fee income.
Higher spending drives expenses
Total consolidated expenses increased 12% from a year earlier to $14.5 billion.
According to the company, the rise reflected higher customer engagement costs linked to increased Card Member spending, the refresh of its U.S. Platinum Card offering and greater use of Card Member benefits, alongside higher operating expenses.
The effective tax rate increased to 23.6%, compared with 18.7% in the prior-year quarter, primarily because the previous year included discrete tax benefits.
Credit quality remains stable
American Express reported provisions for credit losses of $1.1 billion, down from $1.4 billion a year earlier.
The company attributed the decline to a reserve release during the quarter, compared with a reserve build in the corresponding period last year, although this was partially offset by higher net write-offs.
The second-quarter net write-off rate remained unchanged at 2.0%.
Outlook improves after strong first half
Following stronger-than-expected performance during the first six months of the year, American Express raised its full-year revenue growth guidance to 10%.
The company maintained its forecast for full-year earnings per share in the range of $17.30 to $17.90.
“We had another excellent quarter, with 10 percent revenue growth, EPS of $4.53, and Card Member spending growth of 9 percent, the highest rate we’ve seen in three years on an FX-adjusted basis,” chairman and chief executive Stephen J. Squeri said in a statement.
“Based on our better-than-expected performance in the first half of the year, we are raising our full-year revenue growth guidance to 10 percent.”
American Express expands its European presence
Alongside its earnings announcement, American Express revealed plans to acquire TheFork, a European restaurant reservation platform that serves approximately 50,000 restaurants across 11 countries.
The proposed acquisition is expected to strengthen the company’s presence in dining and lifestyle services, complementing its broader customer engagement strategy.
American Express stock price
