American Express Earnings Miss Despite Record Revenue. Why the Stock Is Falling.

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American Express

profit disappointed in the first quarter as the company braced for debt struggles among credit card holders, even as revenue soared to an all-time high.

Amex (ticker: AXP) reported earnings of $2.40 a share in the first quarter—down from $2.73 a year ago—on record quarterly revenue of $14.28 billion. Analysts surveyed by FactSet had expected the group to report earnings per share of $2.66 on revenue of $13.98 billion, with revenue rising from $11.74 billion in the first quarter of 2022.

The group said strong sales reflected growth in core cardholder spending as well as continued engagement with premium products. In addition, spending across travel and entertainment was a standout, up 39% adjusted for foreign exchange effects. Millennial and Generation Z customers continue to be its fastest-growing cohort in terms of spending, up 28% from a year earlier among those demographics.

But Amex, which primarily caters to a premium segment of spenders, is bracing for defaults—which is where investors may want to look to lay blame for the first-quarter earnings miss. Amex recorded consolidated provisions for credit losses of $1.1 billion, reflecting a net reserve build of $320 million. That said, credit metrics have remained strong through April, the company noted.

“Our customers have been resilient thus far in the face of slower macroeconomic growth, elevated inflation and higher interest rates, with credit performance remaining best-in-class,” said Stephen J. Squeri, Amex’s chairman and CEO. “That said, we’re mindful of the mixed signals in the external environment.”

Nevertheless, Amex reiterated its full-year guidance issued in January, expecting revenue growth of 15% to 17% and per-share earnings between $11 and $11.40.

Shares in Amex fell 1.4% in the U.S. premarket, having previously traded 0.7% higher. The results may also be shaking the nerves of

Visa

(V) and

Mastercard

(MA) stockholders, with earnings from both companies due next week. Shares in both

Visa

and

Mastercard

shed 0.5% in the premarket.

Write to Jack Denton at [email protected]