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American Express misses on Q4 earnings, issues stronger-than-expected guidance for 2023

Yahoo Finance Live anchors discuss fourth-quarter earnings for American Express.

Video Transcript

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- American Express reported earnings for the fourth quarter this morning. They missed estimates on the top and bottom lines. The financial services company did issue some stronger-than-expected guidance, though, for fiscal year 2023. They expect revenue to grow. And we're going to be taking a look at some of the figures here in a moment.

Commercial services, that was up 15% from a year ago during the quarter. International card services, that also jumped year-over-year. But it was significantly impacted by the strength of the US dollar, they did note. And it was actually global merchant network services that grew 20% in this quarter, too. You actually spoke with the leadership there, too, this morning.

BRIAN SOZZI: Yeah, I caught up, again, with Amex CEO Stephen Squeri, ahead of our show. Noting, he's not seeing recessionary signals. I go deeper in a story on the Yahoo Finance homepage now. But nonetheless, no recessionary signals for him. Kind of fits well with what we heard, I guess, from a Visa and Mastercard, which we'll talk about in a second here. Saying, travel bookings are up now over 50% versus prepandemic.

Overall, a good quarter. But I think the stock is ignoring this earnings miss and really locked in on this guidance outlook from this company. The earnings were meaningfully above consensus estimates. To call out 15% to 17% revenue growth when we're seeing a lot of, you know, layoffs in the tech industry. A lot of those Amex cards might be getting put-- just put away because those employees are no longer working with the company. An interesting outlook for the company, a very bullish outlook. And the Street appears to be paying more attention to this.

JULIE HYMAN: I mean, what's interesting to me about all three card makers which have now reported, all of them saw volumes that missed estimates. All of them saw volumes increase, that is spending on their cards increase. But all three of them missed estimates.

So spending on visa cards rose by 1.7% to about $3 trillion. It's the biggest. Mastercard's spending rose 11% volume to $1.73 trillion. At Amex was up 12% to $413 billion. And again, all of these numbers were below what analysts were estimating, which is especially interesting given obviously prices are rising.

We did just get those personal spending numbers for the month of December that showed a decrease. So perhaps that's also sort of reflected in some of these numbers. That said, you know, when you look at how these companies did even with those spending numbers missing estimates, things like the outlook even came in rosy here.

BRIAN SOZZI: And both have mentioned in January. And Citi highlighting some of these trends here. Mastercard noting that switched volume month to date so far in January up 21% year-over-year. That's--

JULIE HYMAN: What is switched volume?

BRIAN SOZZI: Just the volume going through their network, which doesn't appear to be recessionary to me. And Visa, US payments volume January month-to-date up 14% year-over-year. So pretty good, all things being considered.

BRAD SMITH: You know, here's the thing that I'm really looking at right now, is where they're investing. And for each of the card companies here-- Visa, Mastercard, and, of course, American Express, more on the corporate side-- when you think about the amount of travel that's re-emerged all of them pointed out travel in one capacity or another, whether it's corporate travel or leisure travel.

And one of the big investments that we heard about from Mastercard, particularly, and this is based off an acquisition that they made, I believe, in late 2020, is really looking at this no card present type of transaction. And that's huge because it's basically saying, all right, I'm just gonna tap to pay anywhere or I've already got my credit card data stored.

BRIAN SOZZI: It's on my phone.

BRAD SMITH: And so--

BRIAN SOZZI: You can pay for me.

BRAD SMITH: Exactly. And so if you're tapping for those payments, then they're looking across where that actually generates a different virtual card number. And that virtual card number business is one of those opportunities that Mastercard is going to invest even more in, especially as you do have even more of this re-emergence eventually of global travel but then additionally just more of the no card present type of transaction. That's everything from your DoorDash order all the way to you doing some cross-border travel perhaps, as well.

JULIE HYMAN: Well, and I guess also shows that even in a fintech digital world, these guys still need these guys.

BRIAN SOZZI: Random nugget. You know, my time with Stephen is always very brief, you know, 10 minutes on earnings day. But I did manage to ask him-- I never asked him before, what it means to have Warren Buffett as your largest shareholder? A little question outside earnings season. Of course, Berkshire Hathaway owns, I believe, close to 20.3% of Amex, a long time holding. He says it's akin to the good housekeeping seal of approval, which is-- really he said also energizes--

JULIE HYMAN: What?

BRIAN SOZZI: --everyone in the company. Pretty cool.