Core Viewpoint - Berkshire Hathaway holds a significant stake in American Express, valued at $37 billion, indicating potential for continued success in the financial sector [1] Group 1: Competitive Strengths - American Express possesses durable competitive advantages, characterized by a strong brand and economic moats, making it a high-quality business [3] - The company has a powerful brand presence in the financial services industry, targeting wealthier clients with premium credit cards that offer high rewards and perks [4] - American Express benefits from a network effect, where increased merchant acceptance enhances the value of its cards for consumers, creating a positive feedback loop [5][6] Group 2: Financial Performance - In 2024, American Express reported a 9% increase in revenue, reaching $65.9 billion, and a 19% rise in adjusted earnings per share (EPS) [7] - The company anticipates revenue growth of 8% to 10% and adjusted EPS growth of 12% to 16% in 2025, with long-term sales growth projected at a minimum of 10% per year [7] - Favorable trends, such as the shift towards cashless transactions and rising GDP, are expected to drive payment volume through American Express's network [8] Group 3: Customer Base and Demographics - The customer base is shifting, with millennials and Gen-Z accounting for over 60% of new consumer accounts in Q1, indicating a growing spending trend among these demographics [9] Group 4: Valuation and Capital Return - American Express shares are currently trading 26% below their all-time high, presenting a compelling valuation opportunity with a price-to-earnings (P/E) ratio around 17, one of the lowest in the past year [10] - The company has a strong capital allocation policy, returning $2 billion in dividends and repurchasing $5.9 billion in stock in 2024, enhancing returns for investors [11]

Core Viewpoint - American Express (AXP) may not appear to be a recession-resistant business, but it possesses characteristics that could enable it to endure economic downturns better than its competitors [1] Company Analysis - American Express has an affluent clientele, which provides a buffer against economic challenges [1] - The company maintains excellent asset quality, contributing to its resilience in adverse economic conditions [1]

Core Viewpoint - American Express is highlighted as a strong investment opportunity, particularly for those looking to invest $1,000, due to its durable competitive advantages and solid financial performance over time [1]. Group 1: Economic Moat and Competitive Strength - American Express possesses a durable economic moat characterized by its strong brand and premium positioning in the credit card market, attracting wealthier customers [2]. - The company's brand supports its pricing power, allowing it to charge merchants higher fees compared to other card networks and to increase annual fees for customers, with the average fee per card rising to $111 in Q1 2025, a 185% increase over the past decade [3]. Group 2: Financial Performance and Growth - American Express has demonstrated sustainable growth, with revenue and diluted earnings per share (EPS) increasing at compound annual rates of 6.7% and 9.7% respectively from 2014 to 2024 [5]. - The leadership anticipates continued growth, projecting revenue to increase by at least 10% annually and EPS to grow at a mid-teens rate [5]. Group 3: Resilience in Economic Downturns - Despite concerns about a potential recession, American Express's affluent customer base is expected to navigate economic challenges better than average consumers, which may minimize losses for the company [7]. - In Q1 2025, American Express reported a net write-off rate of 2.1%, unchanged year over year, indicating stability in credit quality [7]. Group 4: Recent Spending Trends - The company has observed continued strength in restaurant and lodging spending, although there was a deceleration in airline spending compared to 2024 trends [8]. - American Express experienced a 6% increase in billed business, which measures payment volume, in Q1 2025 [8]. Group 5: Valuation and Investment Opportunity - Despite a challenging market environment, American Express shares have declined 18% in 2025, presenting a potential buying opportunity for long-term investors [10]. - With a price-to-earnings ratio of 16.9, below its historical three-year average, the stock is considered a compelling investment at its current valuation [11].

Core Viewpoint - American Express (AmEx) maintains its revenue and profit guidance for 2025, supported by a resilient affluent customer base that continues to spend despite macroeconomic challenges [1][3]. Financial Performance - Q1 2025 EPS reached $3.64, exceeding estimates by 5.5% and reflecting a 9% year-over-year increase [3]. - Network volumes for Q1 2025 totaled $439.6 billion, marking a 5% increase year-over-year [3]. - U.S. Consumer Services reported a pre-tax income of $1.7 billion, up 7% year-over-year, while Commercial Services saw a decline in pre-tax income to $836 million, down 5% year-over-year [3]. - Revenue guidance for 2025 is reaffirmed at an 8-10% growth from $65.9 billion in 2024, with EPS guidance set at $15-$15.50, up from $13.35 in 2024 [3]. Market Estimates - The Zacks Consensus Estimate predicts a 13.9% year-over-year increase in AmEx's 2025 earnings, with 2026 earnings expected to grow by 14.5% [5]. - Revenue estimates for 2025 and 2026 indicate year-over-year growth of 8.5% and 8.4%, respectively [5]. - AmEx has a history of surpassing earnings expectations, with an average surprise of 5.2% over the past four quarters [5]. Stock Performance - Over the past month, AXP shares have declined by 9.1%, aligning with the broader industry downturn, yet outperforming both the industry average and the S&P 500 Index [6]. - Competitors Visa and Mastercard experienced smaller declines due to lower exposure to credit risk compared to AmEx [6]. Valuation Insights - AmEx is trading at a forward P/E ratio of 15.84X, above the industry average of 13.98X, indicating strong investor confidence [8]. - Visa and Mastercard trade at higher multiples of 27.39X and 31.51X, respectively, reflecting their different business models and risk profiles [8]. Business Model and Strategy - AmEx's dual role as a credit card issuer and network operator allows it to capture a larger share of transaction economics, contributing to a more profitable business model [9]. - The company is experiencing strong credit performance and operational efficiency, with rising cardmember spending and expanding lending operations [9]. - A 9% year-over-year decline in Q1 provision for credit losses to $1.2 billion suggests improving credit quality and reduced expectations for customer defaults [10]. Spending Trends and Future Investments - Travel and entertainment spending remains robust, particularly in lodging, dining, and entertainment, areas where AmEx is focusing its efforts [14]. - The acquisition of Center enhances AmEx's presence in high-end dining and lifestyle experiences, reinforcing its premium value proposition [14]. - AmEx is targeting Gen Z and Millennials through marketing efforts to build brand loyalty for future growth [15]. Financial Position - At the end of Q1 2025, AmEx had $52.5 billion in cash and cash equivalents, up from $40.6 billion at the end of 2024, with short-term debt at $1.6 billion [16]. - The company returned value to shareholders by repurchasing 2 million shares for $700 million and paying $600 million in dividends during the quarter [16].

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Financial Performance - Total revenues net of interest expense increased to $16,967 million in Q1 2025, up from $15,801 million in Q1 2024, representing a growth of 7.3%[195] - Net income for Q1 2025 was $2,584 million, compared to $2,437 million in Q1 2024, reflecting an increase of 6.0%[199] - Total non-interest revenues rose to $12,798 million in Q1 2025, a 6.4% increase from $12,032 million in Q1 2024[195] - Earnings per share (diluted) increased to $3.64 in Q1 2025 from $3.33 in Q1 2024, representing a growth of 9.3%[195] - Comprehensive income for Q1 2025 was $2,613 million, compared to $2,354 million in Q1 2024, reflecting an increase of 11.0%[199] - Cash dividends declared for common shares were $576 million for the three months ended March 31, 2025, compared to $507 million in the same period of 2024, marking an increase of 13.6%[220] - Total revenues net of interest expense after provisions for credit losses for the three months ended March 31, 2025, were $15,817 million, up from $14,532 million in 2024, an increase of 8.83%[364] - Net income for the three months ended March 31, 2025, was $2,584 million, compared to $2,437 million in 2024, reflecting a growth of 6.04%[360] Assets and Liabilities - Total assets increased to $282,244 million as of March 31, 2025, compared to $271,461 million at the end of 2024, marking a growth of 4.3%[201] - The company’s total equity increased from $30,264 million as of December 31, 2024, to $31,202 million as of March 31, 2025, representing a growth of 3.1%[220] - The total fair value of AFS debt securities was $1.110 billion as of March 31, 2025, down from $1.240 billion as of December 31, 2024[278] - Total financial assets measured at fair value amounted to $1,319 million, compared to $2,246 million as of December 31, 2024, reflecting a decrease of approximately 41.3%[327] - Total liabilities measured at fair value remained constant at $530 million from December 31, 2024, to March 31, 2025[331] Customer Deposits and Loans - The company reported a net increase in customer deposits of $6,973 million in Q1 2025, compared to $5,283 million in Q1 2024[204] - As of March 31, 2025, total customer deposits increased to $146.396 billion from $139.413 billion as of December 31, 2024, representing a growth of approximately 5.1%[294] - Card Member loans decreased slightly to $133,611 million as of March 31, 2025, from $133,995 million at the end of 2024[201] - Card Member loans as of March 31, 2025, totaled $139,203 million, slightly down from $139,674 million as of December 31, 2024, indicating a decrease of 0.3%[221] - The company’s consumer Card Member loans decreased from $107,646 million as of December 31, 2024, to $105,213 million as of March 31, 2025, a decline of 2.3%[221] Credit Losses and Provisions - The company reported reserves for credit losses of $5,592 million for Card Member loans as of March 31, 2025, compared to $5,679 million as of December 31, 2024, showing a reduction of 1.5%[221] - Provisions for credit losses for Card Member loans were $901 million for the three months ended March 31, 2025, compared to $1,014 million for the same period in 2024[267] - The total reserve for credit losses for Other loans increased to $244 million as of March 31, 2025, reflecting growth in Personal Loans and Business Line of Credit offerings[273] - The company established reserves for interest believed to be uncollectible, reflecting a proactive approach to credit risk management[230] Share Repurchase and Dividends - During the three months ended March 31, 2025, the company repurchased a total of 2,270,300 shares at an average price of $297.37 per share[374] - The company has a remaining authorization to repurchase up to 72,900,519 shares under its publicly announced repurchase programs[374] - The company’s Board of Directors authorized the repurchase of up to 120 million common shares on March 8, 2023, replacing the prior authorization[374] Legal Proceedings - The estimated range of possible loss for disclosed legal proceedings is zero to $190 million in excess of any accruals related to those matters[310] - American Express has accrued for certain outstanding legal proceedings, evaluating developments quarterly to adjust the accrual amount as necessary[309] - The company is involved in various legal proceedings, including antitrust claims, which could have a material adverse effect on its business and results of operations[310] Economic Outlook - The U.S. unemployment rate is projected to be between 3% and 8% by the fourth quarter of 2025, indicating potential economic variability[265]

Core Viewpoint - The financial services companies reported positive results despite economic uncertainties, highlighting customer resilience and strong balance sheets [1][12]. Group 1: Deposit Growth and Credit Quality - Deposit bases expanded or remained stable in a competitive rate environment, with KeyCorp showing mid-single-digit growth year over year and Truist increasing balances while reducing deposit costs by 10 basis points [2] - Credit quality remained robust, with KeyCorp's nonperforming assets decreasing nearly 10% from the prior quarter and Truist's provision for credit losses declining sequentially [3] Group 2: Consumer Spending Trends - American Express reported a 6% year-over-year increase in card member spending, with significant growth among Gen Z and millennials, indicating a focus on experiences [4] - Truist's mobile app saw a 31% increase in consumer loans, with Gen Z volumes rising by 47%, reflecting strong demand among younger consumers [5] Group 3: Investment and Capital Plans - Management teams are pursuing capital plans despite macroeconomic uncertainties, with Truist launching real-time payments and achieving double-digit growth in treasury-management revenue [7] - KeyCorp is actively reviewing clients for tariff exposure while maintaining existing capital expenditure projects, and Fifth Third is investing in Southeast branches and national loan-origination platforms [8] Group 4: Contingency Planning - Each institution has contingency plans in place, with KeyCorp setting aside an additional $8 million in loan-loss reserves and Truist trimming certain expenses while continuing to invest in risk management and digital initiatives [9][10] - The common strategy includes maintaining liquidity, tight credit underwriting, and targeted technology investments to either cut costs or expand fee income [10] Group 5: Market Confidence and Preparedness - Confidence among these institutions is bolstered by low unemployment and stable delinquency metrics, alongside a shift towards higher-quality borrowers and fee-based products [11] - American Express noted that 70% of new accounts carry annual fees, while KeyCorp and Truist emphasized the growth of wealth management and treasury businesses [12] Group 6: Overall Sentiment - Despite acknowledging geopolitical and policy risks, the companies expressed optimism about their preparedness and ability to navigate economic uncertainties [12][13]

American Express Earnings Conference Call Q1'25 APRIL 17, 2025 Summary Financial Performance $ in millions, except per share amounts; % Increase/(decrease) vs. Prior year (Reported) unless otherwise stated | | Q1'25 | Q1'24 | YoY% Inc/(Dec) | | --- | --- | --- | --- | | Total Revenues Net of Interest Expense | $16,967 | $15,801 | 7% | | FX-Adjusted* | | $15,652 | 8% | | Net Income | $2,584 | $2,437 | 6% | | Diluted EPS** | $3.64 | $3.33 | 9% | | Average Diluted Shares Outstanding | 702 | 722 | (3%) | * Tota ...

Financial Data and Key Metrics Changes - The company reported revenues of $17 billion, an increase of 8% year-over-year on an FX adjusted basis, or 9% excluding the leap year impact [7] - Net income was $2.6 billion, translating to $3.64 per share [7] - Total card member spending grew by 6% in the quarter, or 7% excluding the leap year impact [7] Business Line Data and Key Metrics Changes - Card fee growth was up 20% on an FX adjusted basis, with retention remaining high and excellent credit performance [9] - Total billed business increased by approximately 7.5% year-over-year, with goods and services spending growing at a faster pace than in 2024 [20] - Commercial services spend was up 3% year-over-year, consistent with previous trends [22] Market Data and Key Metrics Changes - International card services spend increased by 14%, with strong growth across all top five markets [23] - U.S. SME spending at wholesale merchants saw a modest acceleration, possibly due to higher purchases in anticipation of price increases [22] Company Strategy and Development Direction - The company aims to maintain full-year revenue growth guidance of 8% to 10% and EPS of $15 to $15.50% [10] - The focus is on long-term growth for shareholders, with a commitment to enhancing products and services for customers [15] - The company is investing strategically in technology and customer acquisition to strengthen foundational capabilities [15] Management's Comments on Operating Environment and Future Outlook - Management noted that spending levels have remained consistent with Q1 trends, despite increased macroeconomic uncertainty [10] - The company is confident in its ability to navigate various economic environments due to its resilient business model [10] - Management emphasized the importance of maintaining investment in long-term projects, even in uncertain times [74] Other Important Information - The CET1 ratio was reported at 10.7%, within the target range of 10% to 11% [34] - The company returned $1.3 billion of capital to shareholders, including a 17% increase in dividends [34][77] Q&A Session Summary Question: Has there been any indication of spending pull forward? - Management stated there has been no significant pull forward in spending, with consistent consumer behavior observed [45][46] Question: Which segments would be under pressure from potential tariffs? - Small businesses are expected to be the most impacted, with ongoing risk management efforts in place [54][56] Question: Can you discuss card refresh and fee growth? - The company remains committed to product refreshes and will raise fees only when value is added [60][62] Question: How is the company looking at capital management? - The company aims to return about 80% of earnings to shareholders while continuing to invest in long-term projects [68][70] Question: How does the company view the impact of unemployment on spending? - Management feels comfortable with the guidance despite a higher unemployment rate, focusing on white-collar unemployment as a key driver [85][86] Question: Are there any concerns regarding the Millennial and Gen-Z cohorts? - Spending growth for these cohorts remains strong, with delinquency rates lower than industry averages [91][93] Question: What is the status of the SME technology integration? - The integration of various platforms is ongoing, with the aim of creating a cohesive ecosystem for SME customers [137][139]

Earnings Performance - American Express reported quarterly earnings of $3.64 per share, exceeding the Zacks Consensus Estimate of $3.45 per share, and up from $3.33 per share a year ago, representing an earnings surprise of 5.51% [1] - The company posted revenues of $16.97 billion for the quarter ended March 2025, slightly missing the Zacks Consensus Estimate by 0.18%, compared to $15.8 billion in the same quarter last year [2] Stock Performance - American Express shares have declined approximately 14.8% since the beginning of the year, while the S&P 500 has decreased by 10.3% [3] - The current Zacks Rank for American Express is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Future Outlook - The consensus EPS estimate for the upcoming quarter is $3.89 on revenues of $17.74 billion, and for the current fiscal year, it is $15.21 on revenues of $71.5 billion [7] - The outlook for the Financial - Miscellaneous Services industry, which includes American Express, is currently in the top 31% of over 250 Zacks industries, suggesting a favorable environment for stock performance [8]