American Express 2Q Results: Revenue Growth Slows, But Analysts Remain Optimistic About Healthy Consumer Activity

RBC Capital analyst Jon Arfstrom reiterated American Express Co AXP with a Sector Perform and a $197.00 price target. The analyst recapped the 2Q results. 

Seasonal strength drove improvement in revenue trends, and expenses also came in lower than expected, which prompted the beat. 

Year-over-year revenue growth slowed from the strong 1Q pace as the post-pandemic recovery tailwinds faded. That said, underlying consumer trends still showed a healthy activity level, particularly for T&E categories, where management expects a continued double-digit pace of YoY growth in 2H23. 

Meanwhile, credit quality continues to normalize higher at a very controlled pace relative to peers. Management reiterated their favorable revenue and EPS forecast for 2023, and they remain confident in the momentum across the business. 

The analyst views the longer-term revenue guideposts as credible and achievable, and American Express remains a consistent and high-quality company. He adjusted his 2023E EPS from $11.00 to $11.10, and 2024E EPS remains $12.75.

Citi analyst Arren Cyganovich reiterated a Sell rating with a price target of $148.00.

As highlighted in Hune's note, slowing T&E spending within his proprietary credit card data suggested AXP's spending volumes would disappoint in 2Q, which occurred. 

Shares were modestly weaker on Friday as billed business growth of 8%, expected to hold for the remainder of the year, is below its aspirational revenue growth target of 10%+. 

Higher NII and card fees should lead to higher growth for 2023. 

While the analyst view AXP's fundamental business as attractive, he continues to view its growth expectations as lofty. 

He expects consensus estimates to fall over time, particularly if it enters a recession in 2024. The analyst's 2023 EPS estimate gets a boost from the 2Q beat, but his 2024 EPS estimate remains unchanged. 

BMO analyst James Fotheringham had a Market Perform rating with a price target of $194.00.

Following AXP's 2Q small cost beat, the analyst raised estimates by as much as 2% (lower costs) and maintained the price target. 

Revenue growth decelerated sequentially after lapping the positive impact of Omicron, down to a more normalized +13% annual rate (from +22% in 1Q23).

 AXP must maintain that pace throughout the second half of FY23 to hit the bottom end of its 15-17% full-year guidance range. 

Higher-multiple spend-related growth disappointed while lower-multiple lend-related growth surprised positively, but He remains optimistic about spending growth from millennials, T&E, and international segments.

Price Action: AXP shares are trading lower by 1.31% at $167.99 on the last check Monday.
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