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American Express Blasts Earnings Forecasts on Post-COVID Spending Surge

"Based on current trends, we are confident in our ability to be within the high end of the range of EPS expectations we had for 2020 in 2022," said CEO Stephen Squeri.

American Express Co.  (AXP) - Get American Express Company Report posted stronger-than-expected second quarter earnings Friday thanks to a post-pandemic boom in consumer spending and the release of loan loss reserves. 

American Express said diluted earnings for the three months ending in June were pegged at $2.80, a near ten-fold increase from the same period last year and firmly ahead of the Street consensus forecast of $1.66 per share. The bottom line was supported by a $606 million release of reserves that were previously set-aside to cover bad loans, American Express said.

Group revenues, American Express said, rose 33% to $10.24 billion, firmly beating analysts' forecasts of $9.56 billion tally as consumer credit spending surged thanks to trillions in support from the American Rescue Act as well as child tax credits and enhanced unemployment benefits.  

"We saw Card Member spending accelerate from the prior quarter and exceed pre-pandemic levels in June, with the largest portion of this spending growth coming from Millennial, Gen Z, and small business customers," said CEO Stephen Squeri.

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“As we look ahead, we are increasingly optimistic that the momentum we’ve generated will continue given the strength we see in our core business, particularly in the U.S., even as the pace of the recovery remains uneven in different regions around the world," he added. "Based on current trends, we are confident in our ability to be within the high end of the range of EPS expectations we had for 2020 in 2022.”

American Express shares were marked 3.4% higher in pre-market trading immediately following the earnings release to indicate an opening bell price of $176.70 each.

U.S. retail sales were unexpectedly stronger last month,  suggesting job gains and rising vaccination rates offset inflation concerns in the world's biggest economy.

June retail sales rose 0.6% from last month to a collective $621.3 billion, the Commerce Department said, well ahead of the Street consensus forecast of a 0.4% decline. 

Consumer price increases looked to have little impact on consumer spending, even with June inflation rising at a much-faster-than-expected 5.4% from last year, according to data from the Bureau of Labor Statistics published last week, the fastest pace since 2008.