American Express (NYSE: AXP) enters the fourth quarter backed by real numbers, not just a growth story. Second-quarter revenue rose 10% to $19.6 billion, and diluted EPS climbed 11% to $4.53, extending a streak of earnings beats. Year-to-date EPS is up 14%, and management just raised full-year revenue guidance to 10% growth while reaffirming EPS guidance of $17.30 to $17.90.
That combination, a wealthier customer base, fundamentals still trading at a reasonable multiple, and a stock chart that keeps dipping after strong reports, sets up a real opportunity heading into the company’s October 23 earnings date. The stock has already shown this pattern twice in the past year: a sharp pullback after its January report, and another after July’s beat.
American Express also used the quarter to keep expanding its premium ecosystem, announcing a proposed acquisition of European restaurant platform TheFork and new travel partnerships, moves aimed squarely at deepening loyalty among its wealthier customer base. Investors watching the gap between how American Express is perceived and how it’s actually performing have a lot to work with this quarter.
Here are three reasons American Express deserves a spot on the Q4 watchlist, backed by the company’s own second-quarter results and a look at how the stock has traded around recent earnings reports.
A Premium Customer Base That Lowers Investor Risk
American Express doesn’t chase the same customer as most other card issuers. Its base skews toward affluent consumers and business clients, groups less likely to cut spending when the economy softens. The company’s own credit data backs that up. Card Member delinquencies of 30 or more days fell to 1.2% of balances in the second quarter, down from 1.3% a year earlier, even as total balances grew 9%.
Net write-off rates have stayed anchored near 2.0% for five straight quarters. The company even released reserves in the second quarter rather than building them, a signal management sees credit quality holding steady. Spending trends support that view, too. U.S. Consumer Services billed business grew 11% year over year. Gen-Z spending was up 40%, and Millennial spending was up 14%, showing demand strengthening even among younger cohorts.
Deposit balances grew 9% to $132 billion, with roughly three-quarters held by U.S. Card Members, a sign of how sticky these relationships have become. For investors weighing the debt concerns hanging over other consumer lenders, that combination of low delinquencies and broadening spend tells a cleaner story.
Fundamentals Built to Support Long-Term Gains
Valuation is where the opportunity becomes clearest. American Express trades around 19 times forward earnings, a level that hasn’t kept pace with its growth. Second-quarter earnings grew 11% year over year, and year-to-date EPS growth stands at 14%, in line with the pace management is guiding toward for the full year. Net card fees, the fastest-growing piece of revenue, rose 15% on continued strength in premium card products, while total billed business and transactions both grew 9% to 10%.
Capital strength backs up the growth story. Return on average equity reached 36% in the second quarter, and the company’s CET1 capital ratio sits at 10.4%, comfortably within its target range. American Express returned $2.9 billion to shareholders in the quarter alone through dividends and buybacks. That’s part of a pattern that has returned roughly 76% of net income to shareholders over the past three years, even as the company continues to invest in growth.
A business growing earnings at this pace, generating that kind of return on equity, and returning capital this consistently is not priced like an expensive stock. It’s one the market hasn’t fully credited yet.
A Technical Pattern That Rewards Patient Buyers
The stock’s own chart makes the case. Shares ran from the mid-$320s last September to a high near $388 in December, only to slide to roughly $305 by March, in the weeks following the company’s January 30 fourth-quarter report, even though nothing in the underlying business had broken down. The same pattern showed up more recently. After July’s earnings beat, AXP peaked near $365 before drifting back to around $337 by late August, now sitting just below its 50-day moving average and roughly in line with its 200-day average, a level the stock has bounced around for weeks.
That’s not a company missing numbers. It’s a stock that keeps getting sold after posting strong results, often on profit-taking rather than any real change in the business. If that pattern holds again after October 23, a post-earnings dip could hand patient investors a better entry point than today’s price.
Positioning for a Stronger Fourth Quarter
American Express checks the boxes that matter heading into Q4. Its customer base keeps delinquencies low and write-offs stable even as balances grow and spending broadens across generations, limiting the credit worries weighing on other financial stocks. Its fundamentals, a 19 times forward multiple against double-digit earnings growth, a 36% return on equity, and consistent capital return, still leave room for the market to re-rate the stock higher, especially with management now guiding to the high end of its revenue range.
Its chart has repeatedly created buying opportunities for investors willing to look past a short-term dip after earnings. None of this guarantees October 23 will unfold the same way past quarters have. But for investors tracking the gap between how American Express is perceived and how it’s actually performing, the setup heading into Q4 is one worth watching closely.
