Analyst Note| Michael Miller |
Wide-moat-rated American Express reported strong fourth-quarter earnings as the company continues to see strong usage and interest in its premium credit cards. Net revenue increased 17% from last year to $14.2 billion. Earnings per share of $2.08 were down 5% from the prior year’s quarter, which translates to a return on equity of 34.1%. The decline in earnings was due to a higher provisioning expense, which increased to $1.03 billion from only $53 million last year. We see this as a return to normal provisioning behavior and not a sign of sudden credit deterioration, as the firm’s 2021 results benefited from significant reserve releases. As we incorporate these results, we do not plan to materially alter our $166 fair value estimate for American Express.