Q4 2024 Earnings Summary
- Rising consumer and small business confidence is leading to increased spending, which bodes well for American Express's revenues. For example, U.S. consumer spend was up 9% year-over-year in the quarter, and small business sentiment is "really, really good, and it's higher than it's been in a long time."
- Strong and sustainable growth in international markets, driven by increasing merchant acceptance and investment in card acquisition. American Express has achieved over 80% LIF coverage in key international markets, with merchant acceptance increasing by 8 percentage points over the last 3 years. With less than 6% market share in their top five international markets, there is significant room for growth, particularly in SME and consumer segments.
- Consistent double-digit growth in net card fees over 26 consecutive quarters, supported by 70% of new accounts being on fee-paying products and very strong renewal rates. This sustained growth in card fees contributes significantly to revenue growth and is expected to continue into 2025.
- Uncertainty around sustaining elevated spending levels into 2025 could lead to lower revenue growth. Management acknowledges that the strong holiday spending in Q4 2024 may not continue throughout 2025, stating it's "really hard to answer this in a definitive way" and that "we don't know how it's going to play." This uncertainty could result in revenue growth at the lower end of guidance.
- Expected moderation in net card fee growth after Q1 2025 may impact revenue growth momentum. The acceleration in net card fee growth seen in Q3 and Q4 2024 is anticipated to slow down post-Q1 2025, trending back to mid-teens growth rates, which could reduce overall revenue growth compared to previous quarters.
- Increased competition in the SME segment from emerging fintechs could pressure growth. Competitors like Ramp and Brex are making inroads into the SME market with innovative products, and while American Express is "keeping an eye" on them, the company may face challenges in maintaining its market share in this segment.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +9% | The increase to $17.179B was driven by strong Card Member spending and continued growth in discount revenue and card fees. In prior periods, surging interest income and momentum in travel and dining spend also supported revenue expansion. |
Operating Income (EBIT) | +145% | Growth to $6.167B was fueled by robust revenue gains outpacing expense growth, reflecting significant operating leverage. Prior quarters’ disciplined cost management and moderate increases in credit provisions set a foundation for this substantial jump. |
Net Income | +12% | Rising to $2.17B, net income benefited from increased revenues coupled with controlled operating expenses. In previous periods, higher loan balances and credit provision build partly offset revenue gains, but stable delinquency trends helped sustain net income growth. |
Diluted EPS | +16% | The climb to $3.04 was supported by net income growth and fewer shares outstanding from ongoing share repurchases. Past quarters’ record-high revenues and effective tax rate management also contributed to consistent EPS expansion over time. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
EPS | FY 2024 | $13.30 - $13.80 | $13.75 - $14.05 | raised |
Revenue Growth | FY 2024 | 9% | 9% | no change |
Marketing Spend | FY 2024 | no prior guidance | $6B | no prior guidance |
Operating Expenses | FY 2024 | no prior guidance | fairly flat year-over-year (adjusted) | no prior guidance |
CET1 Ratio | FY 2024 | no prior guidance | 10% to 11% | no prior guidance |
Revenue Growth | FY 2025 | no prior guidance | 8% to 10% | no prior guidance |
EPS | FY 2025 | no prior guidance | $15 to $15.50 | no prior guidance |
Operating Expenses | FY 2025 | no prior guidance | low single-digit growth (vs. 2024 levels) | no prior guidance |
Dividend | FY 2025 | no prior guidance | $0.82 per share | no prior guidance |
Card Fee Growth | FY 2025 | no prior guidance | mid- to high teens, moderating over the year | no prior guidance |
Net Interest Income (NII) Growth | FY 2025 | no prior guidance | outpace total loans & receivables growth | no prior guidance |
Variable Customer Engagement (VCE) Expenses | FY 2025 | no prior guidance | grow slightly faster than revenues | no prior guidance |
Marketing Expenses | FY 2025 | no prior guidance | modest increase in 2025 | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Full-Year EPS | FY 2024 | $13.75 to $14.05 | 14.04 (sum of 3.34+ 4.15+ 3.50+ 3.05) | Met |
Full-Year Revenue Growth | FY 2024 | ~9% year-over-year | ~8.7% year-over-year (Q4 2023: 15,799Vs. Q4 2024: 17,179) | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Consumer spending momentum | Previously stable at ~6% in Q3, 6% in Q2, and 8% in Q1. | Strong U.S. spending was up 9% year-over-year in Q4, driven by holiday momentum. | Accelerated in Q4; caution remains about sustaining into 2025. |
SME segment growth and sentiment | Negative organic SME spend in Q3, modest in Q2, and 1–2% growth in Q1. | 3% growth in U.S. SME, slight improvement in organic spending, and higher small business sentiment. | Trending more positive in Q4, though still below pre-COVID levels. |
International market expansion | Consistent double-digit international growth in Q3, Q2, and Q1; added over 30 million merchant locations in recent years. | 80% acceptance across top 12 markets, T&E coverage >80%, and mid- to high-teens growth in top 5 markets. | Continued strong focus on acceptance and expansion. |
Net card fee growth | 18% in Q3, 16% in Q2, and 16% in Q1. | 19% year-over-year in Q4, marking the 26th consecutive quarter of double-digit growth. | Growth remains robust; slight moderation expected in 2025. |
Uncertainty sustaining spending 2025 | Q3’s 6% billing growth was sufficient but uncertain if it would accelerate; no direct mention in Q2 or Q1. | Executives are unsure if Q4’s elevated spending momentum will persist throughout 2025. | Topic became more prominent in Q4 with increased caution. |
Competition from fintech in SME | No mention in Q3, Q2, or Q1. | Acknowledged growth from Ramp and Brex, with American Express confident in its own offerings (e.g., Kabbage). | Newly discussed in Q4 as competition intensifies. |
Moderation of net interest income | 17% in Q3, moderating in Q2, and 26% in Q1. | NII grew 13% despite normalization in balances, continuing the moderation trend. | Further moderation expected amid uncertain rate environment. |
Millennial and Gen-Z spending | 12% (U.S.) and 23% (Int’l) in Q3; 13% in Q2; 15% in Q1. | Spending up 16% year-over-year in Q4, higher than other cohorts. | Continues to be a leading driver of growth across all periods. |
Large corporate spending | No notable mention in Q3; in Q2 there was a plateau at 0% growth for large corporates. | Not specifically mentioned in Q4 regarding stagnation. | Discussion has faded; no new updates in Q4. |
Pay Over Time usage | Cited in Q3 as a key contributor to loan growth, fastest-growing segment in Q1. | No reference in Q4. | No recent mention after Q3. |
Increased marketing investments | $1.5B spend in Q3, targeting $6B in Q2, and $1.5B in Q1 with reinvestments from rewards benefits. | Reached $6B in total 2024 spend, up 16%, focusing on new customer acquisition. | Remains elevated; slight increase planned for 2025. |
Strong credit performance metrics | 1.9% write-off in Q3, stable in Q2, with best-in-class metrics in Q1 (reserve builds). | Delinquencies and write-offs remain below pre-pandemic levels, stable in Q4. | Continues to outperform; slight rises expected but remains robust. |
Caution on EPS guidance | Q3 guidance raised but still wary of sustaining higher growth; Q2 cautioned due to higher marketing and credit reserves; Q1 was also guarded. | Stated caution for 2025 despite strong Q4, citing potential reinvestments. | Ongoing careful stance as they balance reinvestment and earnings growth. |
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Revenue Growth Guidance
Q: What could be potential headwinds to revenue growth?
A: Revenue growth depends on billings. If billings continue at the level of the fourth quarter, we expect to be at the top end of our 8–10% revenue growth guidance for 2025. If billings are lower, we may be at the lower end. It's truly a billing story. -
EPS Guidance Upside
Q: If revenues exceed expectations, will EPS increase?
A: If revenue growth reaches the high end, we'll decide whether to reinvest in the business or let it flow to EPS. The top end of the EPS range is $15.50, representing 16% growth. It's plausible we could exceed that if conditions are favorable. -
Spending Acceleration
Q: Where did the spending acceleration come from, and is it sustainable?
A: The acceleration was balanced across consumer, SME, and international segments. Consumer billings increased to 9%, up 2 points. Organic spend in SME rose from 1% to 3%. International continued strong growth. Early January trends align with Q4, but it's hard to definitively predict sustainability over the full year. -
Consumer and Business Confidence
Q: How is rising confidence affecting billed business?
A: Increased consumer confidence in Q4 led to higher spending, notably in front-of-cabin airline purchases, which were up 19%. Small business sentiment is strong, offering hope for continued growth, but we'll assess sustained trends before adjusting plans. -
SME Business Momentum
Q: Can you discuss SME business trends and plans?
A: SME acquisition and attrition rates remain steady, but organic spending hasn't fully returned to pre-COVID levels. It's truly an organic story. As small business confidence improves, we expect SME to contribute more to overall billings. -
Capital One-Discover Merger Impact
Q: Thoughts on Capital One-Discover merger's competitive impact?
A: The merger makes Capital One a more formidable competitor with increased scale. We'll continue to compete effectively, especially in the premium space, and will evolve our products to meet competition. -
Competition from Fintechs
Q: How is fintech competition evolving, especially cash-back offers?
A: Our customers value a balance of rewards, experiences, and service over cash back. We haven't seen significant impact from fintechs on the consumer side but remain aware and responsive. On the SME side, we acknowledge fintechs integrating technology with cards and will take appropriate steps. -
International Business Growth
Q: Comment on drivers of international business momentum.
A: International growth is strong, with top five markets growing in the mid to high teens. Merchant acceptance now covers 80% in key markets. With less than 6% market share, we see significant opportunities and expect sustained double-digit growth. -
Net Card Fee Growth Expectations
Q: Why will net card fee growth moderate in 2025?
A: After reaching 19% growth in Q4 2024 due to product refresh cycles, we expect net card fee growth to moderate to mid-to-high teens in 2025. The acceleration will continue into Q1 but should normalize thereafter, supported by high renewal rates and 70% of new customers choosing fee-paying products. -
Operating Leverage from Experiences
Q: Does focusing on experiences provide higher operating leverage?
A: Investing in experiences and lounges involves more fixed costs than variable rewards, allowing us to leverage these costs over a wider base as we grow. This balance gives cardmembers the best of both worlds and can enhance operating leverage over time. -
Product Refresh Strategy
Q: Can you shed light on planned product refreshes?
A: We plan to do between 35 and 50 product refreshes this year but won't specify which ones. We aim to refresh products when needed and have eleven more months to implement them. -
FX Impact
Q: What is the impact of FX on revenue and EPS?
A: FX movements can impact revenue growth by about 1 percentage point, as seen in Q4 where FX-adjusted revenue growth was 10% and GAAP reported was 9%. A 10% increase in the dollar could negatively affect pretax income by around $136 million. Predicting exact impacts is difficult due to global expense distributions.