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Can American Express Turn Premium Card Growth Into Higher Profits?
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Key Takeaways
American Express's net card fees rose 17% to $3 billion, fueled by premium-card growth.
Card Member Services expenses jumped 36% as richer Platinum benefits and higher usage drove costs.
Expected expense growth moderation in Q4 could improve operating leverage and support earnings growth.
American Express Company (AXP - Free Report) is benefiting from strong demand for its premium cards, with net card fees rising 17% year over year on an FX-adjusted basis to $3 billion in the third quarter. Higher average fees and portfolio growth supported the increase. The U.S. Platinum refresh continues to drive momentum, while 76% of new accounts acquired were on fee-paying products.
The growth, however, comes at a cost. Card Member Services expenses jumped 36% to $2 billion, reflecting richer Platinum benefits and higher usage. Card Member Rewards expenses increased 10% to $5.1 billion, while marketing costs climbed 11% to $1.8 billion. Variable customer engagement expenses rose 16% to $8.9 billion, accounting for 44.3% of revenues. If these costs continue to outpace fee growth, they could erode the earnings benefits of AmEx's premium-card strategy.
There is scope for relief. AmEx expects variable customer engagement expense growth to moderate significantly in the fourth quarter as it laps the impact of the Platinum refresh. Slower expense growth could improve operating leverage, allowing more incremental fee revenues to flow through to earnings while supporting customer engagement and retention.
The challenge for AmEx is to sustain premium-card fee growth while keeping rising benefit and customer acquisition costs under control.AI-driven personalization may help improve customer engagement, although its contribution to profitability remains uncertain. Sustained fee growth alongside better expense control would strengthen its profitability and support longer-term earnings growth.
How Are Competitors Faring?
American Express faces competition from other credit card issuers, including Citigroup Inc. (C - Free Report) and Synchrony Financial (SYF - Free Report) , as they seek to grow card spending while maintaining profitability.
Citigroup recorded 11% growth in overall card spend volume, while general-purpose card spending advanced 13%. However, higher rewards and partner-payment costs weighed on non-interest revenues, which declined 62% year over year. C's ability to convert spending growth into stronger revenues remains an important factor for its card business.
Synchrony Financial reported an 8% increase in purchase volume and 3% growth in loan receivables. However, net earnings declined 17%, while net interest margin contracted 12 basis points to 15.50%. SYF needs to sustain loan growth while protecting margins and controlling operating costs.
AXP’s Price Performance, Valuation & Estimates
Shares of AXP have lost 12.7% over the past year compared with the industry’s 28.5% decline.
Image Source: Zacks Investment Research
From a valuation standpoint, AXP trades at a forward price-to-earnings ratio of 16.16, up from the industry average of 13.08. AXP carries a Value Score of C.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for AXP’s 2026 earnings is pegged at $17.94 per share, implying a 16.6% jump from the year-ago period’s level.
View the Zacks #1 Rank List
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Can American Express Turn Premium Card Growth Into Higher Profits?
Key Takeaways
American Express Company (AXP - Free Report) is benefiting from strong demand for its premium cards, with net card fees rising 17% year over year on an FX-adjusted basis to $3 billion in the third quarter. Higher average fees and portfolio growth supported the increase. The U.S. Platinum refresh continues to drive momentum, while 76% of new accounts acquired were on fee-paying products.
The growth, however, comes at a cost. Card Member Services expenses jumped 36% to $2 billion, reflecting richer Platinum benefits and higher usage. Card Member Rewards expenses increased 10% to $5.1 billion, while marketing costs climbed 11% to $1.8 billion. Variable customer engagement expenses rose 16% to $8.9 billion, accounting for 44.3% of revenues. If these costs continue to outpace fee growth, they could erode the earnings benefits of AmEx's premium-card strategy.
There is scope for relief. AmEx expects variable customer engagement expense growth to moderate significantly in the fourth quarter as it laps the impact of the Platinum refresh. Slower expense growth could improve operating leverage, allowing more incremental fee revenues to flow through to earnings while supporting customer engagement and retention.
The challenge for AmEx is to sustain premium-card fee growth while keeping rising benefit and customer acquisition costs under control.AI-driven personalization may help improve customer engagement, although its contribution to profitability remains uncertain. Sustained fee growth alongside better expense control would strengthen its profitability and support longer-term earnings growth.
How Are Competitors Faring?
American Express faces competition from other credit card issuers, including Citigroup Inc. (C - Free Report) and Synchrony Financial (SYF - Free Report) , as they seek to grow card spending while maintaining profitability.
Citigroup recorded 11% growth in overall card spend volume, while general-purpose card spending advanced 13%. However, higher rewards and partner-payment costs weighed on non-interest revenues, which declined 62% year over year. C's ability to convert spending growth into stronger revenues remains an important factor for its card business.
Synchrony Financial reported an 8% increase in purchase volume and 3% growth in loan receivables. However, net earnings declined 17%, while net interest margin contracted 12 basis points to 15.50%. SYF needs to sustain loan growth while protecting margins and controlling operating costs.
AXP’s Price Performance, Valuation & Estimates
Shares of AXP have lost 12.7% over the past year compared with the industry’s 28.5% decline.
Image Source: Zacks Investment Research
From a valuation standpoint, AXP trades at a forward price-to-earnings ratio of 16.16, up from the industry average of 13.08. AXP carries a Value Score of C.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for AXP’s 2026 earnings is pegged at $17.94 per share, implying a 16.6% jump from the year-ago period’s level.
Image Source: Zacks Investment Research
AXP currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.