American Express Analyst Says Buy The Earnings Dip: 'Fundamentals Remain Strong'

American Express Company AXP shares traded lower by 3.1% on Friday morning after the credit card and digital payments company reported third-quarter earnings and revenue beats on Thursday.

What Happened? The New York-based company reported third-quarter adjusted EPS of $2.47 on revenue of $13.6 billion. Both numbers topped consensus analyst estimates of $2.40 and $13.5 billion, respectively.

Revenue was up 24% from a year ago.

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Why It's Important: Despite the top and bottom-line beats, American Express shares drifted lower on Friday as investors zeroed in on slightly disappointing network volume and higher-than-expected provisions.

On Friday, Bank of America analyst Mihir Bhatia said American Express may be a victim of overly high expectations, but the company's core business fundamentals remain strong.

"Expectations for AXP had increased following large banks and airlines results and with AXP shares up 595bps MTD outperforming the S&P 500 by 363bps, we think the market was looking for more strength in AXP billings and less reserve building," Bhatia said.

Total provisions were $778 million, exceeding Bhatia's estimate of $562 million.

The billed business was up 24% on a constant-currency basis, and American Express assed 3.3 million new proprietary cardholders in the quarter, including a record number of new U.S. Consumer and Small Business Platinum cardholders.

Looking ahead, America Express also guided for 2023 revenue growth above its long-term target of 10%. American Express also reiterated its full-year revenue growth guidance of between 23% and 25% but said it now expects full-year EPS to be "above the original range of $9.25-$9.65."

Bank of America has a Buy rating and $172 price target for American Express.

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Benzinga's Take: The stock may have slumped out of the gates on Friday, but American Express investors can feel good about an earnings and revenue beat and a guidance hike. The quarter may not have been perfect, but it seems that expectations may have simply drifted too high ahead of the print.