American Express (AXP 0.68%) has outperformed its peers so far this year, as the stock price is up about 12% year to date and 27% over the past 12 months as of April 25. The credit card company just released its first-quarter earnings report and it beat analysts' estimates due to a 29% increase year over year in revenue.
One statistic from that report is particularly relevant to American Express and should drive growth moving forward: travel spending.
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Travel spending returns to pre-pandemic levels
American Express relies more heavily on travel and entertainment spending than its competitors, on a relative basis. It is one of the leading providers of corporate credit cards and offers a variety of travel rewards and incentives on many of its consumer cards. It is a big reason why American Express lagged its competitors in 2020 when travel basically shut down due to the pandemic.
But as travel has slowly returned over the past 12 months, American Express has seen a boost in revenue. In the first-quarter earnings report, American Express saw a 121% year-over-year increase in travel and entertainment (T&E) spending among its members, including a 42% increase in business travel spending.
In March alone, American Express reached a long-awaited milestone: It saw T&E spending return to pre-pandemic levels, led by a surge in travel spending. That trend has continued into April, CEO Stephen Squeri said on the first-quarter earnings call.
Another good indicator is the fact that its Delta Air Lines credit card reached an all-time high in new acquisitions, or new accounts, in March, while its business platinum cards hit an all-time high in new acquisitions in the first quarter.
Overall, T&E spending was at 88% of pre-pandemic levels in Q1, taking into account lower numbers in January and February, which were hurt by the omicron variant of the coronavirus. That's up from 82% in the fourth quarter. T&E spending now represents about a quarter of all customer spending, down from about one-third in the first quarter of 2019. Spending on airlines is down 34% from pre-pandemic levels and lodging is down 22%, but these numbers are heading in the right direction. It should be noted that restaurant spending has already returned as it was 19% higher in Q1 than it was in 2019.
NYSE: AXP
Key Data Points
Travel spending a tailwind
These trends are good news for American Express because the more the cards are used, the more fees it collects each time the card is swiped. There are also annual fees that cardholders pay, as well as interest income from the American Express credit cards that charge interest.
On the earnings call, Squeri said he expects these travel trends to continue, due to pent-up demand after two down years. "We expect this to be a pandemic recovery tailwind throughout this year," Squeri said. Travel bookings on American Express cards are up 37% from pre-pandemic levels among clients globally, and 48% in the U.S. alone.
"So, people are looking to get out there and travel," he said. "And I think that's what's driving us."
