American Express Earnings: Surge in Travel Spending and Net Interest Income Drives Revenue Growth

Wide-moat-rated American Express reported strong first-quarter earnings as robust travel spending growth, particularly international travel spending, drove higher spending volume growth, while rising rates and higher loan balances led to rapid net interest income growth. This impressive revenue growth was offset, however, by higher credit costs. Net revenue increased 22% from last year to $14.3 billion, while earnings per share was down 12% to $2.41. This translates into a return on equity of 28.7%. The decline in earnings was due to a higher provisioning expense, which increased to $1.06 billion from a benefit of $33 million in the year-ago period. As we incorporate these results, we do not plan to materially alter our $169 per share fair value estimate.