Warren Buffett’s Berkshire Hathaway has held a significant stake in American Express for over 60 years. Despite trimming various stock positions throughout 2024, Buffett has not sold any shares of American Express, suggesting he believes the stock has further potential for growth. American Express shares rose by 58% in 2024.
The company’s unique business model has allowed it to grow earnings at a remarkable rate, even with slower revenue growth. For the nine months ending September 30, 2024, American Express reported a 9% increase in revenue and a 28% increase in earnings per share (EPS) year over year. This strong earnings growth has been driven by solid credit performance and operating leverage.
Management raised its full-year EPS guidance for 2024 due to the company’s strong financial performance. The expected EPS range was adjusted from $13.30-$13.80 to $13.75-$14.05.
Buffett’s unwavering belief in AmEx
American Express’ single-digit revenue growth appears sustainable in the near future, supported by multiple growth levers. In Q3 2024, the company saw 8% year-over-year top-line growth, driven by a 6% increase in card member spending, an 18% rise in card fee revenue, and a 17% uptick in net interest income. The stock’s valuation remains attractive, with a current price-to-earnings (P/E) ratio of 22 and a forward P/E of 20.
This is below the market index’s average P/E of about 25, indicating that the stock is reasonably priced given its growth momentum. While no investment is without risk, and there’s no guarantee that the current stock price is the best entry point in 2025, American Express shares represent an attractive long-term investment as part of a diversified portfolio. American Express continues to be a strong performer in Berkshire Hathaway’s portfolio.
With its robust growth rates and attractive valuation, it presents a compelling case for investment. Whether or not investors decide to follow Buffett’s lead, American Express looks poised for continued success in the coming years.
