Strong Spending Growth Leads to Impressive Q2 Results for American Express

Wide-moat American Express reported strong second-quarter results that came in above our expectations as an accelerated recovery in international and corporate travel spending provided a boost. Net revenue grew 31% from last year to $13.4 billion, while earnings per share fell 8% to $2.57. The drop in EPS was primarily due to higher credit loss provisioning, with the firm building $58 million in reserves (versus an $866 million release last year). We see the increase in reserves as a return to normal provisioning behavior, not a consequence of weak underwriting. As we incorporate these results, we do not plan to materially alter our $166 fair value estimate.