American Express Expects Big Profits in 2024 with Happy Customers Leading the Way

American Express charts a course for a lucrative 2024, surpassing market expectations with an optimistic outlook. The company's robust projection hinges on the belief that its affluent clientele will uphold resilient spending habits, even amidst the backdrop of escalating interest rates. This positive foresight fueled a nearly 3% surge in the company's pre-market shares on Friday.

Despite looming concerns over a potential recession in 2023, American Express confidently reported unprecedented revenue figures for the year, showcasing the remarkable financial resilience of its upscale customer base. The company's adept handling of economic challenges positions it favorably among its peers, as the financial well-being of high-earning individuals proves less susceptible to inflationary pressures and escalating borrowing costs.

Expressing contentment with the company's performance, American Express CEO Stephen Squeri remarked, "We have accomplished what we set out to do, and we find ourselves ahead of our projected journey."

However, a note of caution reverberates as the credit card giant bolstered its loan loss provisions in the fourth quarter to $1.44 billion, marking a substantial increase from the previous year's $1.03 billion. The Federal Reserve's series of eleven rate hikes, contributing to heightened borrowing costs, raises concerns about potential defaults, particularly in credit card debt.

For the quarter ending on December 31, American Express reported a profit of $2.62 per share, signaling a notable increase from $2.07 per share a year earlier. Although slightly below analysts' expectations of $2.64 per share, the company's total revenue for the fourth quarter surged by 11% to $15.80 billion. The annual revenue for 2023 exhibited a substantial rise of 15%, reaching $60.52 billion.

In the financial outlook for 2024, American Express envisions earnings per share ranging between $12.65 and $13.15, surpassing analysts' estimates of $12.41. This optimistic trajectory aligns with broader industry trends, with peer Visa Inc recently unveiling favorable quarterly results propelled by robust spending on travel and holiday shopping. However, it's worth noting that smaller industry peers, such as Discover Financial and Capital One, reported lower profits in the quarter due to increased credit loss provisions, adding nuance to the broader financial landscape.

Also Read: Goldman Sachs Reports Strong Q4 Profits Amid Market Rebound and Strategic Success in 2023