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Shares of American Express (NYSE:AXP) fell more than 6% Friday despite strong third-quarter results and outlook as investors were spooked by a reserve build and higher expenses in the quarter. Some analysts also pointed to slowing network volumes.
The credit card provider posted net income of $1.9 billion, or $2.47 per share, compared with net income of $1.8 billion, or $2.27 per share, a year ago and the consensus of $2.41.
On the top line, American Express revenue grew 24% in the quarter to $13.6 billion, versus the consensus of $13.47 billion. This was a record-high revenue number for the second quarter in a row.
Total network volumes rose 19% in the quarter, versus 24% for the nine-months period.
The company said overall spending was up 21%, or 24% percent on an FX-adjusted basis, driven by growth in both Goods & Services and Travel & Entertainment spending.
“The demand for travel has exceeded our expectations throughout the year, with spending on T&E increasing 57 percent from a year earlier and T&E spending volumes in our international markets surpassing pre-pandemic levels for the first time this quarter, both on an FX-adjusted basis,” CEO Stephen Squeri commented.
While the company said credit metrics remained strong they are “mindful of the mixed signals in the broader economy and have plans in place to pivot should the operating environment change dramatically, as we have done in the past.” As a result, provisions for credit losses were $778 million, compared with a benefit of $191 million a year ago. Wall Street had expected provisions of about $600 million. The change reflected a reserve build of $387 million, primarily driven by growth in Card Member loans and changes in macroeconomic forecasts.
On the expense side, consolidated expenses were $10.3 billion, up 19 percent from $8.7 billion a year ago. The increase primarily reflected higher customer engagement costs, driven by a 19 percent increase in network volumes and higher usage of travel-related benefits.
Looking ahead to the full year, the company continues to expect full-year revenue growth of 23% to 25% and now expects to be above its original full-year EPS guidance range of $9.25 to $9.65. The Wall Street EPS consensus is already at $9.91 for the year.
