American Express earnings show a recovery in business travel

American Express earnings show a recovery in business travel

Rome. Tourists, guides, rubbish and fences at the Colosseum.

Riccardo de Luca | Universal picture group | Getty Images

Travel and entertainment spending rebounded in the second quarter, and according to the latest results from American Express, it wasn’t just consumers making the purchases.

The company said consumer spending in this category exceeded pre-pandemic levels for the first time in April. Notably, there was also a significant increase in business travel.

Results were good enough for AmEx to raise its revenue guidance, and shares rose more than 5% on the news.

AmEx expects sales to rise between 23% and 25% this year, up from a previous forecast of 18% to 20%. Analysts polled by Refinitiv are calling for 19% revenue growth this year.

However, the company’s earnings guidance remains unchanged. AmEx is expecting earnings of $9.25 to $9.65 per share, down from analyst expectations of $9.83 per share.

The results are another example of the conflicting headlines investors see when weighing the likelihood of a recession. Decades of inflation are forcing the US Federal Reserve to raise interest rates to cool the economy. At the same time, pent-up consumer demand, especially for experiences such as travel, concerts and other entertainment, frees up many expenses.

Last quarter, AmEx said overall spending on cards is up 30% on a currency-neutral basis thanks to a combination of robust demand and naturally rising prices for so many goods and services today. Spending from Millennials and Gen Z consumers has been particularly resilient, up nearly 50%, the company said.

In the second quarter, AmEx earned $1.96 billion, or $2.57 per share, on revenue of $13.4 billion. That compares to average earnings estimates of $2.41 per share on Refinitiv’s $12.5 billion in revenue.

Last year, AmEx made $2.28 billion in the second quarter, or $2.80 per share.

AmEx’s performance was weighed down by the need to add $410 million as a provision for credit losses. Last year, it posted a profit of $606 million.

Consumers also redeemed the reward points they had earned to further increase their dollars. That drove spending by almost a third to $10.4 billion.

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