Amex Aces Q1 2025: Strong Start to the Year!

American Express (NYSE: AXP) has announced a strong first quarter for 2025, delivering solid financial results and maintaining its full-year guidance.

Here are the key highlights from the Q1 2025 earnings:

• Revenue Growth: Total revenues reached $17.0 billion, marking a 7% year-over-year increase, or 8% on an FX-adjusted basis. Excluding the leap year impact, revenue growth was even higher at 9%.

• Net Income and EPS: The company reported net income of $2.6 billion, a 6% increase compared to the previous year. Diluted earnings per share (EPS) increased by 9% to $3.64.

• Strong Spending: Total card member spending grew by 6% in the quarter, or 7% excluding the leap year impact. Spending on goods and services continued to grow at a faster rate than in 2024.

• Premium Customer Strength: The premium customer base continued to spend at healthy levels during the first quarter. Specifically, spend growth for the Millennial and Gen-Z cohort was up about 15% in the U.S. consumer business, representing about 35% of overall spend. Internationally, this cohort's spending was up 22%.

• Record Net Card Fees: Net card fees reached record levels, increasing by 20% on an FX-adjusted basis, marking the 27th consecutive quarter of double-digit growth. American Express acquired 3.4 million new cards in the quarter, demonstrating strong demand for their products.

• Healthy Lending: Loans and card member receivables increased by 7% year-over-year on an FX-adjusted basis, primarily driven by premium products, with pay over time and co-brand portfolios accounting for around 80% of growth in card member revolving loans.

• Excellent Credit Performance: Both delinquency and write-off rates remained below pre-pandemic levels and flat to the prior year, indicating strong credit quality. The delinquency rate of low tenure U.S. consumer card members (24 months or less) is about 30% lower than 2019 levels.

• Full-Year Guidance Maintained: Based on steady spending and credit trends, American Express is maintaining its full-year revenue growth guidance of 8% to 10% and EPS of $15 to $15.50. This guidance incorporates increased macroeconomic uncertainty, including a peak weighted average unemployment rate of around 5.7%.

• Long-Term Investment Focus: Despite potential economic headwinds, American Express remains committed to its refresh strategy and will continue to invest in technology and other initiatives for long-term growth. There are refreshes in progress for a number of products.

Analysts at Wells Fargo noted that billed business growth (adjusted for leap year) held steady in late Q1 and into April, and the Q1 growth rate was above most of 2024. They maintain an Overweight rating on AXP, highlighting the resilience of their billed business. Morningstar analysts reported that the Q1 results were largely in line with their expectations, and they maintain their fair value estimate of $255 for American Express, considering the shares currently fairly valued.

Overall, American Express delivered a strong start to 2025, showcasing the strength of its premium customer base, robust spending, and effective business strategies in the face of increasing macroeconomic uncertainty.