American Express (AXP) Premium Customer Base Spending Growth Could Help Earnings

$American Express(AXP)$ is expected to report the quarterly earnings for fiscal Q1 2025 on 17 April 2025 before the market open.

The consensus estimate for the quarterly revenues are anticipated to amount to $17 billion, this would exhibit an increase of 7.6% compared to the same quarter year-ago.

The quarterly earnings of $3.48 per share is expected which would be an increase of 3.9% compared to same quarter one year ago.

American Express (AXP) Last Positive Earnings Call Saw Decline of 21.37% Share Price

The earnings call highlighted American Express's strong performance with record revenues and net income, robust card acquisition, and international growth. However, some challenges include moderated loan growth and uncertainty about sustained spending momentum. The company remains confident in its strategy and potential for growth in 2025.

American Express (AXP) Guidance

During the American Express Q4 2024 Earnings Call, the company provided optimistic guidance for 2025, forecasting revenue growth of 8% to 10% and an EPS range of $15 to $15.50, marking a 12% to 16% increase over the previous year. The 2024 performance was robust, with record revenues of $66 billion, a 10% increase on an FX-adjusted basis, and a net income of $10 billion, translating to an EPS of $14.01, up 25% from 2023. Key metrics included an 8% growth in fourth-quarter billings, aided by strong holiday spending, and a record 13 million new card acquisitions.

The company also highlighted best-in-class credit performance and disciplined expense management. American Express anticipates sustaining its growth momentum through continued investment in product refreshes, with plans to refresh 35 to 50 products in 2025, and further expansion of its merchant network, which achieved 80% coverage in top international markets.

Key Considerations for AXP’s Q1 2025 Earnings:

American Express reported record revenues of $66 billion for 2024, up 10% on an FX-adjusted basis, with net income reaching $10 billion and earnings per share of $14.01, up 25% year-over-year.

Consumer Spending Trends: AXP’s revenue heavily depends on cardmember spending, particularly in travel, dining, and entertainment (its core premium segments). Economic conditions (e.g., recession risks, consumer confidence) will dictate spending volumes. A rebound in international travel post-pandemic could boost cross-border transaction fees.

While Q4 spend growth was strong, there is uncertainty regarding whether this momentum will sustain throughout 2025.

International business grew by 15% in Q4 2024, with significant opportunities for continued growth in underpenetrated markets. SME customer base and spending also saw improvement.

Credit Quality: AXP’s loan portfolio and delinquency rates will be critical. While its focus on high-income customers historically shields it from severe credit stress, rising unemployment or inflation could increase defaults. Provision for credit losses (which rose in 2022–2023) will reflect economic uncertainty.

Loan growth moderated over the course of the year, which was expected as customers were no longer building revolving balances post-pandemic.

Interest Rate Environment: Higher interest rates could boost net interest income (from revolving balances), but they also increase funding costs. AXP’s profitability depends on balancing this dynamic. Unlike banks, AXP’s revenue mix leans more on fees (60%+), reducing its sensitivity to rate swings.

A strong U.S. dollar poses a headwind, with a 1 percentage point impact on revenue growth in Q4 2024 due to foreign exchange adjustments.

Membership Growth and Retention: AXP’s ability to attract new cardholders (especially younger demographics) and retain existing ones through rewards, perks, and co-branded partnerships (e.g., Delta, Hilton) will drive growth. Competition from Chase Sapphire, Capital One Venture, and fintechs (e.g., Apple Card) remains intense.

American Express added millions of new merchant locations globally and achieved 80% merchant coverage in its top 12 international countries.

Fee Income Dynamics: Discount revenue (merchant fees) is AXP’s largest income source. Growth depends on expanding merchant acceptance (historically a challenge outside the U.S.) and transaction volumes. Annual membership fees ($695 for Platinum Cards) provide steady recurring revenue if retention stays strong.

The company achieved record net card fees and acquired 13 million new cards, with continued high card member retention.

Expense Management: AXP’s aggressive marketing and rewards costs (e.g., Centurion Lounge expansions) could pressure margins. Investors will watch its operating leverage (revenue growth vs. cost growth).

American Express (AXP) Price Target

Based on 21 Wall Street analysts offering 12 month price targets for American Express in the last 3 months. The average price target is $297.79 with a high forecast of $370.00 and a low forecast of $230.00. The average price target represents a 16.61% change from the last price of $255.38.

I think we need to watch AXP strategic initiatives which AXP is focused on expanding in SME (small business) cards and international markets (e.g., India, Europe). Invested in digital tools (e.g., Amex Send, mobile app enhancements) to compete with fintechs.

This might help in their earnings and fees collection and boost their price target move to the higher end.

Technical Analysis - Exponential Moving Average (EMA)

If we looked at how the tariffs turmoil would cause consumer to cut their spendings, Amex credit card charge might be affected for the following quarter.

Though we are seeing the sentiment improving for AXP in terms of the share price movement, there have been some attempt for daily uptrend, I hope the bulls can continue to make a daily uptrend expansions.

There might be a possibility as we are seeing improvement from the RSI where there was a crossover of the RSI over the RSI MA, this could signal a bullish reversal.

But we need to be careful for the long term, as consumer spending might reduce significantly, hence affecting AXP business.

Summary

AXP’s Q1 2025 results will likely hinge on these factors :

1. Macroeconomic Health: A recession could dent premium consumer spending and increase defaults.

2. Travel Demand: Sustained recovery in corporate and luxury travel post-pandemic.

3. Success in International Markets: Progress in regions where Visa/Mastercard dominate.

4. Regulatory Risks: Potential scrutiny of card fees or antitrust concerns.

AXP’s premium customer base and fee-driven model position it better than many peers in volatile markets. The Q1 2025 earnings and guidance should be modest considering that the economic uncertainty would force consumer to spend less, hence AXP maintaining spending growth would need to be watched closely.

One more item would be AXP ability to manage its credit risk and also defending its niche against rivals especially the new incumbents.

I would monitor AXP and see how the tariffs implementation and reversal goes, before I decided to take a long term position for AXP.

Appreciate if you could share your thoughts in the comment section whether you think AXP could post an earnings surprise because of its premium customer base spending.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.