Why American Express Stock Surged Today

What happened

Shares of American Express (AXP 10.54%) climbed 10.5% on Friday after the credit card giant boosted its dividend and provided an upbeat financial forecast for the coming year.  

So what

American Express’s revenue rose 17% year over year to $14.2 billion in the fourth quarter. The gains were fueled by record spending by card members, which helped to drive the payments leader’s total network volume higher by 12%, to $413.3 billion.

“Our performance demonstrates that our strategy is working, and our business is in an even stronger position today than before the pandemic,” CEO Stephen Squeri said in a press release. He added:

We have significantly grown the company’s revenue base by investing in our value propositions, increasing our generational relevance, growing merchant acceptance, introducing new digital capabilities, and enhancing our membership model with new lifestyle offerings and financial services.

All told, American Express’s net income decreased by 9% to nearly $1.6 billion. The decline was largely due to increased provisions for credit losses, though the company said its credit metrics remained strong.

Now what

Management sees revenue growing by as much as 17% in 2023, with earnings per share rising by roughly 14%, to between $11 and $11.40.

During a conference call with analysts, Squeri helped to assuage investors’ fears regarding a potential recession by highlighting the robust purchasing behavior of American Express’s affluent card members. “That premium customer base, while not immune to an economic downturn, certainly, right now, is spending on through,” Squeri said. 

These encouraging sales trends, combined with the company’s resilient financial performance during the current challenging macroeconomic environment, gave American Express the confidence to boost its quarterly cash dividend by 15%, to $0.60 per share.

American Express is an advertising partner of The Ascent, a Motley Fool company. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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