American Express’s (NYSE:AXP) Q1 results said travel and entertainment spending has returned to prepandemic levels, mostly driven by consumer travel. But it’s seeing signs that business travel is starting to come back as well.
Overall travel and entertainment spending “essentially reached 2019 levels for the first time since the start of the pandemic in the month of March,” American Express (AXP) Chief Financial Officer Jeffrey Campbell said during the company’s earnings call. “And this kind of T&E spending growth has continued right into early April.”
In addition, “large and global corporate clients have begun to show signs of business travel recovery, especially in the latter part of the quarter with a year-over-year growth rate for the quarter of 42%,” Campbell said.
Chairman and CEO Steve Squeri pointed out that the T&E spending increase isn’t all due to inflation. Booking on a global basis rose 38% from 2019 and in the U.S., they rose 48%.
“As far as large corporations go, and we’re seeing it in our own company, people are looking to get out and not only gather with their own colleagues, but they’re also looking to get out and meet with customers,” Squeri said.
Part of the reason that AXP stock is falling 1.0% in midday trading may be the company’s higher than expected expenses. Total expenses of $9.06B exceeded the $8.94B Visible Alpha consensus. Investors may also be disappointed that the company didn’t increase its guidance after Q1 EPS easily beat the consensus.
The higher-than-expected expenses resulted in “slightly worse-than-expected” preprovision net revenue, said Goldman analyst Ryan Nash in a note to clients.
The fact that American Express (AXP) reiterated its 2022 guidance after Q1 earnings beat estimates leads to the “logical conclusion” that it’s increasing investments/expenses, Nash said.
Indeed, the company sees “a range of good investment opportunities,” Squeri said during the call. And compared with his outlook at the beginning of 2022, “I probably see better opportunities than I did with the (original) plan.” But those will take time to pay off. “And what they do is they set us up better for 2023 and 2024,” he added.
Earlier, American Express Q1 earnings reflect rebound in travel & entertainment spending