American Express(AXP)2024-10-18 14:55Financial Data and Key Metrics - Q3 2024 EPS was 16.6 billion, up 8% YoY, marking the 10th consecutive quarter of record revenues [7] - Full-year EPS guidance raised to 14.05, up from 13.80, with expected revenue growth of around 9% [7] - Net card fees increased by 18% YoY, driven by product refreshes and strong demand for premium products [24] - Total loans and card member receivables grew by 10% YoY, with loan growth at 15% in Q3 [21] - Delinquency rates remained low, and write-off rates declined to 1.9% in Q3 [22] Business Line Performance - US Consumer Gold Card acquisitions are running 30% higher than Platinum, with 80% of new Gold Card members coming from Millennials and Gen-Z [9] - Dining-related spending in the US Consumer business grew 7% YoY, nearly twice the industry rate since 2019 [11] - International Card Services saw spend growth of 13%, with Japan up 17% and Mexico up 15% on an FX-adjusted basis [20] - Commercial Services spend growth was modest, consistent with previous quarters [20] Market Performance - US Consumer spending remained stable, with Millennial and Gen-Z customers driving 12% growth [19] - International markets showed strong performance, with all top five markets growing in double digits [20] - High-yield savings balances grew by 19% YoY, with over 75% of balances coming from existing card members [28] Strategy and Industry Competition - The company's product refresh strategy has resulted in 40 refreshed products globally in 2024, with more expected by year-end [8] - Dining is a key focus, with investments in Resy and Tock to enhance dining capabilities and differentiate Amex membership [11][12] - The company's premium customer base and strong merchant relationships position it well to compete in the dining space [14] Management Commentary on Business Environment and Outlook - Management remains confident in long-term growth prospects, citing the sustainability of the product refresh strategy and strong customer engagement [7][8] - The company expects continued growth in card fees and lending, driven by premium products and customer retention [17][21] - Despite a softer spending environment, the company is focused on delivering mid-teens EPS growth [34][37] Other Important Information - Marketing expenses were 6 billion [27] - Operating expenses were 2.4 billion in capital to shareholders, including $1.9 billion in share repurchases [28] Q&A Session Summary Question: Revenue Growth and Billings Acceleration [32] - Management emphasized the need for billings acceleration to achieve 10% revenue growth, with card fees and NII contributing to growth [33][34] Question: EPS Growth in a Slower Revenue Environment [36] - The company expects mid-teens EPS growth even with 6% billings growth, driven by strong customer acquisition and product refreshes [37][39] Question: Business Development Spend and Weather Impact [41] - Business development spend was lower due to reduced incentives tied to billing levels, with no weather impact on guidance [42][43] Question: Marketing Investments and Returns [45] - The company is ramping up marketing investments, with no signs of diminishing returns, and expects to increase investments in 2025 [46][47] Question: Customer Acquisition and Product Refresh Cycle [50] - The company has surpassed its goal of refreshing 40 products in 2024 and expects continued growth in customer acquisition [51][52] Question: Affluent US Consumer Sustainability [57] - The affluent US consumer base remains stable, with no signs of stress, and international consumer spending grew 13% YoY [58][59] Question: Revenue Growth and Discount Revenue Trends [61] - Revenue growth is expected to remain stable, with Q3 trends continuing into Q4, and discount revenue growth impacted by international markets [62][63] Question: Lifetime Value and Spend by Card Category [65] - Customers moving from Green to Gold to Platinum cards show higher lifetime value, with Platinum cardholders spending more on travel and lifestyle benefits [66][67] Question: Net Interest Income Dynamics [69] - NII growth is expected to moderate, with minimal impact from Fed rate changes, and a focus on high-yield savings accounts for funding [70][71][72] Question: Card Acquisitions and Product Refresh Adoption [74] - Card acquisitions are in line with expectations, with product refreshes driving demand and engagement [75][76] Question: Fed Easing Impact on Bill Business Growth [78] - Fed easing is expected to support consumer and small business confidence, potentially boosting organic spending [79][80] Question: T&E Spend and Restaurant Investments [82] - Restaurant spending remains a strong category, with investments in Resy and Tock expected to drive further growth, while airline spending remains robust [83][84][85]