American Express Co.’s second-quarter revenue rose less than analysts expected as spending growth on the firm’s cards slowed to the lowest level in more than two years.
(Bloomberg) — American Express Co.’s second-quarter revenue rose less than analysts expected as spending growth on the firm’s cards slowed to the lowest level in more than two years.
Volume on Amex’s network increased 8%, the weakest gain since the first quarter of 2021 and a smaller increase than analysts anticipated. The firm’s stock dropped 5%, the worst performance in the Dow Jones Industrial Average.
Amex is facing tough comparisons to recent quarters, which included bigger increases in travel and entertainment spending as consumers freed from pandemic-era restrictions flocked to international and domestic travel destinations.
“In January and February of 2022, we were all back sitting in our houses and there wasn’t a lot of activity, so last quarter on the T&E side we had crazy growth rates,” Chief Financial Officer Jeff Campbell said in an interview. “This is probably the first quarter now that is representative of the more stable kind of growth rates we’d expect.”
Amex shares dropped to $168.25 at 9:49 a.m. in New York. The stock has climbed 14% this year, outpacing the Dow’s 6.3% advance.
Volume on Amex’s network increased to $426.6 billion. While that was a record for the company, it still missed the $441.6 billion average of analyst estimates compiled by Bloomberg.
Amex said travel and entertainment spending jumped 14% in the quarter. Restaurants are now the largest component in that category, with Amex consumers spending more on dining out than they do on airlines or hotel stays.
“You saw an increase during the pandemic in people taking deliveries from restaurants,” Campbell said. “As people returned to in-person dining, they haven’t necessarily abandoned that.”
Amex said it renewed its longtime partnership with Hilton Worldwide Holdings Inc. through 2033, one of the longest extensions of a co-brand partnership the company has ever done. Under the terms of the agreement, Amex will continue as the exclusive issuer of Hilton consumer and small-business credit cards in the US.
Expenses for the second quarter rose less than expected, boosting profit to a record $2.17 billion, or $2.89 per share. That topped analyst expectations, and the company said it still expects full-year profit to jump to a range between $11 and $11.40, while revenue should climb 15% to 17%.
Amex’s results come as economists are increasingly hedging their bets about the chances of a US recession as inflation ebbs and the economy remains resilient.
“We’re firing in all cylinders here,” Chief Executive Officer Steve Squeri said in an interview with Bloomberg Television. “The likelihood of a recession or a hard landing or anything like that is fading as we move along.”
–With assistance from Caroline Hyde.
(Updates share price in fifth paragraph, adds CEO’s comment in last.)
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