By Niket Nishant and Pritam Biswas
(Reuters) -American Express reported third-quarter profit above Wall Street estimates on Friday, benefiting from disciplined expense management that helped cushion a blow from softer spending.
Affluent customers have allowed the company to maintain relatively smaller provisions for credit losses compared with peers that serve a broader spectrum of customers, including those with lower income.
The credit card giant has also kept a lid on incentives, rewards and other expenses, allowing it to outdo profit expectations even when revenue growth decelerates.
“(This quarter is) another proof point of management’s ability to flex expenses to hit earnings per share (EPS) targets when top line is softer,” said Citi analyst Keith Horowitz.
Still, AmEx shares fell nearly 5% even as it raised its profit forecast for 2024.
“Over time, cost-cutting can only take you so far,” said Brian Mulberry, client portfolio manager at Zacks Investment Management, an investor in AmEx.
Total expenses were $12.08 billion in the quarter, lower than expectations of $12.74 billion, according to estimates compiled by LSEG.
Revenue rose 8% to $16.64 billion but fell short of the $16.67 billion estimate. Profit of $2.51 billion was 2% higher than last year.
On a per-share basis, AmEx earned $3.49 versus the $3.28 that analysts had forecast.
“We do not need double-digit revenue growth to hit mid-teens EPS because we are disciplined with our operating expenses. Our credit is also very, very strong,” Chief Financial Officer Christophe Le Caillec told Reuters in an interview.
The company now sees 2024 EPS between $13.75 and $14.05, higher than the earlier range of $13.30 to $13.80.
“Expectations were elevated, but we believe the growth opportunities remain large and the valuation remains attractive,” William Blair analysts said in a note.
(Reporting by Niket Nishant and Pritam Biswas in Bengaluru; Editing by Maju Samuel)
