American Express (NYSE:AXP) expects to finish the year with revenue growth of about 10% and earnings per share growth in the mid-teens, Chief Financial Officer Christophe Le Caillec said, citing strong spending by premium cardholders and demand for the refreshed Platinum Card.
Speaking at a company news event, Le Caillec said the company has grown revenue at a compound annual rate of about 10% and earnings per share in the mid-teens over the past four years. He also pointed to strategic moves including the closing of TheFork acquisition, commercial product launches and progress on artificial intelligence.
Le Caillec said Platinum Card renewals were in the 99% range following the product’s refresh. “The demand for the product, the engagement that we saw with the product” and the renewal rate reinforced the company’s premium-market position, he said.
Spending and card fees remain strong
Cardholder spending has grown in the 8% to 9% range over the past four or five quarters, including 8% in the latest quarter, Le Caillec said. Travel and entertainment spending grew 10%, with airline spending up 13% and restaurant spending up about 9%.
Commercial billing growth was 5% for a second consecutive quarter when adjusted for the sale of two portfolios, he said. International spending growth has been in double digits for 22 quarters.
Le Caillec expects card fee revenue growth to reach the high teens in the fourth quarter, after accelerating to 17% from 15% in the second quarter. He said the company generated approximately $3 billion in card fees in the latest quarter, with renewals the largest contributor to fee revenue.
“Nothing can grow at 17% forever,” he said, while expressing optimism about further product refreshes and cardholder engagement.
Managing benefit costs
American Express expects its full-year VCE-to-revenue ratio to be between 44% and 45%, Le Caillec said. After the company laps the Platinum refresh, he expects the ratio to return to its prior trend of modest increases as the portfolio shifts toward premium products.
He said 76% of new accounts in the third quarter were on fee-paying products. While VCE is a useful measure, he said it does not capture benefits from marketing, customer selection and operating leverage.
Among the steps the company is taking to manage costs, Le Caillec cited new points-redemption options and changes to benefit terms, including a $75,000 spending threshold to take full advantage of lounge access and a second-night requirement for a hotel credit. He said the goal is to make benefits attractive to cardholders while generating compelling returns for the company.
AI and commercial investments
Le Caillec said AI has become more central to the company’s expense management and product development than he anticipated at the start of the year. American Express has been working with OpenAI on the ability to reserve Resy restaurants through ChatGPT and on a plug-in that would let cardholders browse available offers, he said.
The company is also working with third parties on voice agents for customer service. Le Caillec said an existing voice agent can handle certain transaction-validation and fraud-prevention calls, providing an expense benefit by displacing some people on the phone. On the revenue side, he identified more personalized marketing as a major opportunity.
In commercial products, American Express has introduced a corporate cashback card, an initial expense-management solution and a business savings account. Le Caillec said early results from the expense-management offering were good, but it was too soon to discuss customer feedback broadly.
He cautioned that an acceleration in commercial spending would take time because sales and development cycles are long. The company is also working toward an accounts payable solution and more AI-powered agents.
International growth opportunity
Le Caillec described international markets as a significant opportunity, citing faster growth than in the United States and an average spend share of about 6% in leading markets. He said expanding merchant acceptance remains an important growth lever because acceptance overseas is not as broad as in the U.S.
About American Express (NYSE:AXP)
American Express Company is a global payments and financial services company that operates a card-issuing business and a payments network. Its products and services include consumer, small-business and corporate cards, payment processing, lending, travel services and expense-management solutions. Founded in 1850 as an express mail business, the company expanded into financial services and became known for its charge cards and travel-related services. Today, it serves cardholders and businesses in the United States and markets around the world, connecting customers, merchants and financial institutions through its network.
