AXP Drops 3% on Debit Delinquencies Despite 9% Spending Growth

$AXP did almost everything right last quarter and still got punished for it. Card member spending rose 9%, the highest growth rate in three years. EPS came in at $4.53, beating the $4.40 consensus. Revenue net of interest expense climbed 10% to $19.6 billion. The company even raised its full-year forecast. And the stock dropped 3.3% anyway, now sitting about 8% in the red for the year. Wall Street: the place where good news goes to feel bad about itself.

So what's the problem? Two words: credit delinquencies. Bloomberg's Stock Movers coverage flagged that rising delinquencies in the credit card ABS market have now climbed above pre-COVID levels, and that shadow is hanging over AmEx's otherwise solid report. Meanwhile, CNBC's coverage noted revenue came in at $19.6 billion, just a hair below the $19.7 billion Wall Street estimate. In a market this twitchy, a $100 million miss is apparently enough to cancel out three years of momentum.

Here's the tension the YouTube finance world is quietly circling: AmEx's customer base skews wealthy, which is exactly why its spending numbers look so strong. But the broader consumer picture, flagged by analysts on CNBC covering Albertsons earnings, is genuinely deteriorating. The K-shaped economy is getting more K-shaped by the quarter, with the top 20% of households driving roughly 80% of product value purchases. That's great for AmEx right now. It's less great if even upper-income consumers start pulling back, which some analysts are warning could happen within the next six months.

The bull case is straightforward: AmEx is a premium consumer brand with sticky cardholders, accelerating net card fees, and a raised full-year outlook. The bear case is that delinquency creep is a leading indicator, not a lagging one, and that a softening macro could chip away at even the affluent spenders keeping AmEx's numbers shiny right now.

Huntington Bancshares CFO Zach Wasserman, speaking on Bloomberg, described consumer activity as "very normal" and highlighted the fastest quarterly loan growth in three years across major regional banks. That's mildly reassuring. But "very normal" and "above pre-COVID delinquency levels" sitting in the same earnings season is the kind of contradiction that keeps credit analysts awake at 2am refreshing ABS data.

AmEx is basically the financial equivalent of a restaurant that's still packed every Saturday night but quietly raising menu prices while the neighborhood around it starts looking rougher. Enjoy the lobster while it lasts.