Sticking With This American Express Price Target

American Express (AXP) delivered another strong quarter on Friday morning, with record Q3 2026 revenue of $20.1 billion, up 9% year over year. That growth would have been roughly a point higher if not for the exit from its small business co-brand portfolios. GAAP EPS came in at $5.42, up 31%, but there’s a fair amount of noise in that figure.

Backing out the gain on the sale of its Global Business Travel Group stake and the restructuring charge it funded, adjusted EPS was $4.68, up 13%. But that adjusted figure also included, a $0.51 per share hit from higher legal reserves that was offset by a $0.29 discrete tax benefit and a $0.24 benefit from updated reserve models. That meant Amex bested consensus EPS expectations by $0.18 for Q3 2026. Management was clear the penalty doesn’t impact 2026 guidance, the consent order carries no asset cap, and remediation costs aren’t expected to affect 2027 guidance.

With that as the backdrop, American Express reaffirmed its 10% revenue growth target for 2026 and tightened its EPS guidance to $17.60 to $17.90 from the prior $17.30 to $17.90 and the $17.60 consensus. Given its penchant for over promising and over delivering and CEO Stephen Squeri comment that Amex is on track for mid-teens EPS growth this year, the company’s full year EPS is more likely to be in the upper end of that new range.

Looking out to 2027, the combination of higher annual average fee per card figures and cards in force mixed with the company’s announced 5% headcount reduction bodes well for another double-digit year of EPS growth. Factor in Amex’s position with more affluence consumer spending, leads us to reiterate our long-term price target of $400 and our One rating. Unlike competitors Mastercard (MA) and Visa (V), Amex’s EPS is far less influenced by cardholder spending given that more than two-thirds of its pre-tax income is derived from net card fee revenue.

With that in mind, should we see the growth rate for net card fees slow, that would be a sign for us to potentially reconsider AXP shares role in the Portfolio. However, given the new partnership with Airbnb as well as management continued focus on stacking up membership benefits and lifting the average fee per card, we don’t (ahem) see that re-think in the cards near term. Rather, should inflation tailwinds continue to blow at current levels or intensify further, we see Amex and its shares standing apart from Mastercard and Visa.

Now let’s turn and examine some of the Q3 2026 quarter details for Amex.

Looking at card spending, billed business rose 8%, in line with the prior four quarters, despite a roughly 60-basis-point drag from the sale of the Amazon (AMZN) co-brand portfolio midway through the quarter. Discretionary categories did the heavy lifting. Travel and entertainment spending rose 10%, with airline spending accelerating to 13% and restaurants, the largest T&E category, up 9%. U.S. consumer spending rose 9.4%, the third-highest quarterly growth rate in three years, and one year after the U.S. Platinum refresh, spend retention on that portfolio sits at 99%.

Next week’s September Personal Spending report will be a nice yardstick by which to measure Amex’s U.S. consumer spending figure. our suspicion is that based on what we’ve seen with personal consumption spending in July and August, Amex took spending share in Q3 2026. Odds are we’ll be able to say the same for Costco (COST).

Commercial spending rose 3% in the quarter, and international spending grew 11%. Helping drive that continued double-digit growth at international, merchant acceptance for Amex cards now reaches more than 190 million locations, up from 160 million a year ago.

On the new business front, American Express acquired 3.1 million new cards in the quarter, with 76% of new accounts on fee-paying products. Simple math tells us that’s roughly 2.4 million new fee-paying accounts, and CFO Christophe Le Caillec noted the 76% figure is the highest since the company began reporting the metric.

In commercial cards, the Graphite card launched earlier this year is performing better than management expected, and a new corporate cash back card, a business savings account and integrated expense management tools are aimed squarely at middle-market competitors such as Ramp and Brex. On the network side, Squeri shared the company has moved away from courting the largest banks and toward smaller and mid-size partners such as Synchrony and Bread Financial, with recent network deals including the NFL and Lowe’s. Odds are we’ll see more of those, which bodes well for growing the number of cards in force.

Turning to net card fee revenue, it remains the fastest-growing line on the income statement, at roughly $3 billion for the quarter. Growth accelerated to 17% on an FX-adjusted basis from 15% in the second quarter, which is the second-half inflection management called for at the start of the year. That acceleration is being driven by the U.S. Platinum refresh and the continued shift toward premium, fee-paying products. As you’d expect, management declined to offer quarterly or 2027 card fee guidance, saying we’ll have to wait until January for the latter. However, given some additional lift in the current quarter’s average fee per card from Q3 2026’s $136 figure and the $122 one for Q4 2025, net card fees should remain a significant driver of Amex’s pre-tax income.

Ahead of Friday’s earnings call, American Express announced an exclusive partnership with Airbnb that brings more than 1 million listings worldwide into its Amex Travel program and expands travel benefits for eligible U.S. card members. It follows recent announcements of new and expanded Centurion Lounges and a next-generation corporate card expense management program, and in our view it’s another example of the company continuing to invest in the value of membership. That also bodes well for continued card growth and higher average net card fees in the coming quarters.

As for expenses and margins, underlying operating expense growth was 3%, which was far slower than Amex’s top line growth for the quarter. The company also took a $336 million restructuring charge, funded with part of the travel stake gain, that’s expected to eliminate about 5% of its positions globally. While it would be logical to tie those cuts to cost savings, management framed it as pushing Amex to adopt AI and other technologies to help streamline the company, free up capacity to invest in priorities, and make card membership more valuable.

For example, management discussed efforts to leverage AI across customer acquisition, engagement, payments and servicing, including a deepening partnership with OpenAI to bring Resy and Amex Offers into ChatGPT, offering business tools built with Perplexity, and early work on standards for AI agent-initiated payments, including a planned Agent Purchase Protection program.

During the earnings call, Amex management noted that over the last 16 years, the company doubled its revenue and tripled its EPS, while reducing its share count and increasing its annual dividend to shareholders. Those achievements speak to not only the power of Amex’s membership business model, but management’s ability to improve that value proposition over time while continuing to wring cost out of the business. Leveraging AI and other tools suggest that will continue.

With those drivers still in place, we are inclined to remain owners of AXP shares. Because our position size is rather full near 4.0% of the Portfolio’s assets, we’re not inclined to add more AXP shares, but we see the current risk to reward in the shares as very favorable. If the shares were to pullback near $300 due to market pressures in the coming days, in our view that would be a compelling pick-up point for patient investors.

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At the time of publication, TheStreet Pro was long AMZN, AXP and COST shares.