Many analysts rushed to upgrade their 12-month price targets following American Express' (AXP -0.62%) fourth-quarter update last week. Interestingly, this incremental bullishness from Wall Street comes even as the company's top-line growth decelerates.

So, what is there to love about the report? RBC Capital analyst Jon Arfstrom, who increased his 12-month price target on shares from $220 to $226 after the report, breaks down the bull case: It boils down to better-than-expected expense management, a steady normalization of delinquency rates, and good momentum across several key business metrics.

Let's explore these ideas further to see if Arfstrom is onto something.

A flexible spending model

There's no way around it: American Express' growth is slowing. The company's Q4 year-over-year revenue-growth rate slowed to 11%, down from 13% in Q3 and 17% in the first half of 2023. Looking to 2024, management guided for 9% to 11% top-line growth -- down from 14% growth for the full year of 2023. But here's what has Arfstrom and some other analysts upbeat even in the face of slowing growth: American Express management is still guiding for earnings-per-share (EPS) growth in 2024 to increase at a rate in the mid-teens. This expectation for strong-earnings momentum is primarily due to a combination of disciplined spending, operating leverage, and a flexible spending model.

Highlighting its operating leverage, management said it expected operating expenses to be flat compared to last year, with total expenses growing at a rate in the mid-to-high single digits (this is slower than its guidance for 9% to 11% revenue growth). Management often cites its ability to remain agile with spending and adjust it for various markets as a strength of its business.

"We will, of course, continue to assess opportunities as we move through the year, and our flexible model will allow us to dial up or down investments as needed," said American Express Chief Financial Officer Christophe Le Caillec during the company's earnings call.

Manageable delinquency rates

Arfstrom also applauds American Express' modestly rising delinquency rates as its customers' credit profiles normalize manageably. The integrated-payments specialist's delinquency rates of 2% still remain below pre-pandemic levels. Furthermore, this rate increased sequentially in Q4 but at a slower rate than peers.

A slow and steady normalization gives management visibility into its business and can help the company adjust marketing expenses and its credit-underwriting models as needed.

Key tailwinds

Another reason to bet on the stock is its multifaceted growth model, including soaring interest income and robust card-fee revenue growth. This takes some of the pressure off of the company to constantly grow card spending on its platform.

American Express' interest income, for instance, rose 31% year over year in Q4. While some of this has been driven by net-yield expansion versus last year due to a higher interest rate environment, growth in revolving loan balances has also helped.

Additionally, the company's fee-based membership model also continues to generate nice growth in card-fee revenue. Net card-fee revenue rose 14% year over year in Q4. Year-over-year increases to some of the fees it charges cardholders helped, but the primary driver for this segment is actually growth in the number of cardholders with fee-based premium cards.

Though management expects both of these tailwinds to moderate some in 2024, their strength today is a testament to the company's multifaceted growth model. Management can pick and choose from areas to invest in while it manages its expenses in a disciplined and agile manner.

Overall, it's easy to see why Arfstrom remains bullish on the stock even as top-line growth is slowing. Trading at just 18 times earnings and boasting a dividend yield of 1.2%, American Express stock continues to look attractive even after the stock's 40% gain over the past three months.