As investors set their sights on Visa's upcoming earnings, they're not just evaluating a company; they're seeking insights into the broader health of the average consumer.

At LikeFolio, we're adopting a cautious stance ahead of this event, spotting potential warning signs in our data concerning member growth and consumer satisfaction.

Despite some positive signals (consumers are still swiping!), if we were to back a long-term contender in this sector, it's American Express (AXP) leading the charge.

Resilient Spending Amid Economic Pressures

October 2023 brought a modest resurgence in consumer spending, up 0.7% year-over-year, a recovery from stagnation according to Bank of America card member data.

This resilience is particularly noticeable in the services sector, even as retail falters and rising fuel prices strain lower-income consumers.

The labor market echoes this toughness, showing green shoots of recovery, particularly among lower-income demographics, albeit with a concerning lag in wage growth for the higher-income bracket.

Learning from Peers: Caution Despite Strength

A look at American Express underscores the complex landscape. The company recently bolstered its financial safeguards against customer defaults, a move that sent shares tumbling by 5%, overshadowing robust financials — a 13% revenue surge to $15.38 billion and record EPS of $3.30, fueled by robust spending on experiential sectors like travel and entertainment. This prudence, reflecting in a hike in credit loss provisions to $1.233 billion from the prior year's $778 million, signals growing corporate caution despite consumer spending resilience.

Visa's Mixed Signals: Swiping Up, Happiness Down

LikeFolio's proprietary data paints a nuanced picture for Visa (V).

On the one hand, consumer mentions have climbed by a notable 25% YoY, indicating that cards are still spending.

However, online engagement metrics lag behind the "luxury" appeal of its peer AXP, potentially signaling a slowdown in new card memberships.

More troublingly, consumer happiness with Visa trails competitors, hinting at underlying issues.

Structural Shifts and Slowing Momentum

Visa's stock felt the pressure recently when plans to alter its share structure came to light. And while Q3 2023 saw a 22% spike in net income on the back of strong consumer spending and a travel uptick, the enthusiasm dampened post-market, with the slowest profit acceleration since 2021.

Looking ahead, the macroeconomic outlook suggests headwinds; as U.S. personal-consumption expenditures are expected to normalize following pandemic-induced inflation, Visa's 2024 revenue growth could feel the pinch.

Sidelined with a Long-Term Eye on AXP

For this earnings event, we're on the bench. Our data points to AXP as potentially the stronger horse in the long race, given its outperformance, "luxury" consumer perception, and higher consumer happiness scores.