American Express says it did not see signs of credit stress in Q2

American Express Company (NYSE: AXP) says continued demand for travel and entertainment pushed spending to a record high in the second quarter. Its shares are still down roughly 5.0% this morning.

Why are American Express shares down today?

Despite hitting an all-time high, spending growth, nonetheless, slowed down versus the prior quarter.

The stock is responding also to $15.05 billion in revenue net of interest expense that came in shy of Street estimates. Still, Betsy Graseck – a Morgan Stanley analyst remains bullish on AMEX.

Our top pick in this space is American Express, which we expect to continue benefitting from an ongoing travel and entertainment boom.

For the full financial year, American Express continues to see up to 17% growth in revenue on $11 per share to $11.40 per share of earnings, as per the press release.   

Notable figures in AMEX Q2 earnings report

• Earned $2.17 billion versus the year-ago $1.96 billion
• Per-share earnings also climbed from $2.57 to $2.89
• FactSet consensus was for $2.81 of earnings per share
• Networks volumes jumped 8.0% YoY to $427 billion
• Provisions for credit losses stood at $1.20 billion

Is it worth investing in AXP?

American Express also revealed today that 70% of new accounts in Q2 were from its premium offerings. More importantly, CFO Jeffrey Campbell said delinquency rates remain unchanged versus the prior quarter and signs of credit stress were not evident either.

Morgan Stanley’s Graseck sees upside in AMEX to $188 that suggests more than a 10% gain from here. The stock is already up nearly 15% versus the start of the year.

On Friday, the card issuer also announced a 10-year extension on its partnership with Hilton Worldwide.