Big Dividend Hike, Continued Share Gains Confirm Our Views on This Holding
Here’s what we’ll be listening for on this morning’s earnings call.
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After running up over the last several trading sessions, the market’s initial reaction to December-quarter results from American Express AXP has the shares trading off ahead of the company's earnings call this morning. That move lower comes even though Amex delivered earnings of $3.03 per share, a penny ahead of consensus expectations, on revenue that matched the market forecast of $17.2 billion. Amex also guided 2025 revenue up 8%-10% year over year while EPS guidance of $15-$15.50, bookends the market consensus of $15.25.
Coming off the sharp move higher in AXP shares and positive travel data points from multiple airlines this week, the initial reaction this morning tells us the market was looking for stronger results.
Given some of the uncertainties that lie ahead, we’re not surprised to see Amex deliver in-line guidance, but there are multiple reasons for us to remain bullish on the company’s prospects and its shares. The biggest is the 17% increase in Amex’s quarterly dividend to $0.82 per share, which was nicely ahead of the increase to $0.77 modeled across Wall Street. Amex also continued to grow the number of its cards in force to 146.5 million, and the average fee per card. That combination continued to drive a steady increase in net card fees during the quarter, which remains a nice foundation for future earnings growth. We’re also seeing that the membership base spends more through Amex’s network, which is reflected in network volume trends as well as average spending per card statistics.
All of this is very confirming for our decision to add AXP shares to the TheStreet Pro Portfolio, but the larger-than-expected dividend hike and what we learn on the earnings call, may lead us to revisit our current price target. On the earnings call, we will be listening for comments on marketing spend, which rose 9% year over year in the December quarter. That’s a potential lever that could determine how conservative the company’s 2025 EPS outlook could be. Amex also continued to repurchase shares during the quarter and we’ll be interested in management’s comments about future activity given current share price levels.
At the time of publication, TheStreet Pro Portfolio was long AXP.
