Despite Sharing Strong Earnings In Third Quarter, American Express’s Shares Have Plunged By 6%

American Express recently shared its earnings for the third quarter of 2022 where it reported stronger gains. Despite sharing stronger-than-expected earnings, shares of American Express have plunged.

Strong Earnings

For the 3rd quarter, American Express confirmed that they were able to generate strong earnings. Their earnings were higher than the expected figures set by the analysts.

Despite sharing strong earnings, the share prices of American Express ended up facing a huge downtrend. The decline was recorded even when American Express shared high profits for a full year.

The data suggests that the trading price of American Express witnessed a more than 6% demise in the latest trading session.

$778 Dedicated to Provisions

While sharing the earnings report, American Express also revealed that they had set aside a total of $778 million in the form of provisions.

The company had to dedicate such a large amount due to the growth of the loans. In addition to the growing loans, the company is also fearing a great fallout in the economy.

According to the data, the analysts had expected that the provisions would be somewhere around $604.1 million.

Statement by Stephen Squeri

Stephen Squeri, the chief executive officer at American Express issued a statement about the economic pressure.

He stated that although their company has been performing well, still, they are being very mindful of the growing economic pressure.

As the economic situation is facing a broad decline, they are readying themselves for the upcoming downfalls. The economic situation has been changing dramatically all over the world.

Therefore, it is important that the company is ready to face any challenges that come its way in the near future.

Rate Hikes are taking their Tool

The Federal Reserve has been displaying great aggression when it comes to increasing interest rates. According to the US Feds, this is their way of fighting the growing inflation rates in the country.

As the interest rates continue increasing, they would continue taking their toll on the entire country. As a result of the rate hikes, many expect that an economic downturn would be witnessed.

In addition to the downturn, there are also strong indications that the growth of their company would be slowed down as well.

Earnings Generated by American Express

For the third quarter, American Express officials posted that their net income had risen by 3% and it was at $1.88 billion.

The estimation that the analysts had set was $2.41 per share but they achieved $2.47 per share.

The card member also revealed that in the third quarter, their revenue rose by 24% and moved up to $13.6 billion. Whereas, their spending also experienced a great push as it was pushed by 21%.

The company revealed that they have recorded great contributions from GenZ and millennial customers.

The company has also upgraded its full-year profit outcome. Initially, it was set to $9.25 per share but now, it is at $9.65 per share.