American Express (AXP) shares fell over 2% today after CFO Christophe Le Caillec cautioned investors about potentially inflated revenue expectations for Q1 2025. Le Caillec, speaking at an investor conference, stated current Wall Street forecasts of nearly $17.1 billion in revenue net of interest expense are “too high.”
Factors Contributing to Lower Revenue Projections
The lowered revenue outlook is attributed to two primary factors: one less business day in the first quarter of 2025 compared to prior periods and a stronger US dollar relative to December. These factors are impacting projected growth, which was a robust 9% in Q4 2024 in terms of revenue net of interest expense.
Reaffirming Full-Year Guidance Despite Q1 Concerns
Despite the tempered expectations for Q1 2025, Le Caillec emphasized management’s confidence in their full-year guidance. This guidance, issued a few weeks prior, projects 8% to 10% revenue growth and earnings per share between $15 and $15.50 for the entirety of 2025. Furthermore, the company anticipates a 17% increase in its quarterly dividend.
Evaluating American Express’ Valuation and Long-Term Prospects
Currently trading at over 20 times forward earnings, American Express’ valuation is considered elevated, though not at its historical peak. The financial sector has recently benefited from a steepening yield curve and increased market confidence in consumer strength. This improved backdrop, coupled with American Express’ resilient customer base and strong management team, suggests positive long-term prospects.
Conclusion: A Balanced Perspective on American Express Stock
While short-term revenue projections might be causing today’s share decline, American Express’ long-term fundamentals appear solid. The company’s strong business model and anticipated full-year performance suggest continued value for shareholders. However, the current elevated valuation may present short-term risks and potential pullbacks, warranting a cautious approach for investors.
