American Express loss 4% after Wall Street open. Weaker revenues 📉

American Express (AXP.US) shares are trying to cut losses after an opening in which they lost nearly 4%. A fifth consecutive record quarter in terms of revenue and profits was not enough to sustain the gains. Revenue disappointment has put pressure on profit realization to prevail. The company's performance may be one non-obvious measure of the health of US consumers and the economy. Spending remains high, with no compression of margins in sight. At the opening, the company's shares are trying to halt declines near an important support level.

Revenues: $15.05 billion vs. $15.48 billion forecast (Refinitiv), up 12% y/y

Earnings per share (EPS): $2.89 vs. $2.81 forecasts (Refinitiv) and $2.57 in Q1 2023

Net profit: $2.17 billion vs. $1.96 billion in Q1 2023

Payment volume: $427 billion, up 8% y/y

American Express maintained its Q1 2023 revenue growth estimate of 15% to 17% for the full year 2023 and earnings per share in the range of $11 to $11.4.

• Wall Street, however, was concerned about lower revenues, which should trend upward in an inflationary environment. Nonetheless, the company reassured that it reported record spending in the Q2 card segment, driven by seasonality in travel and entertainment. According to management, Q2 2023 was the first for which the impact of the covid pandemic was nil, and despite general macro uncertainty, consumer spending remains strong. This, however, did not surprise analysts, as this was also the consensus.
• In the commentary, the company stressed that it did not register any decline in its customers' activity in the entertainment and travel segments. It recorded growth in the international business segment, where it mediates between customers and small businesses. Record revenues were provided by food and beverage, just above revenues from hospitality and airline tickets. At the same time, American Express-owned restaurant chain Rosy reported a record for quarterly bookings;
• As many as 70% of newly registered accounts at American Express came from premium, fee-paying customers, and more than 60% went to cardholders among 'millenials' and Gen Z, underscoring the long-term growth potential of the business, with high interest from younger generations. The company increased its loan loss provisions by $1.2 billion, up from $410 million in Q2 2022 (net provision increase to $327 million vs. $58 million in Q2 2022). Still, American Express indicates that it does not yet see immediate signs of credit stress despite higher interest rates. The company has extended its partnership with hotel chain Hilton Worldwide Holdings for another 10 years.

The American Express (AXP.US) shares have retreated below $170 where demand is struggling to hold support near the 23.6 Fibonacci retracement of the upward wave from the fall of 2022. Source: xStation5