Shares increased 10.5% Friday, their best single-day performance since Nov. 9, 2020, when they rose 21.4%.

Total network volume was $413.3 billion for the latest quarter, up from $368.1 billion a year before. The company is benefitting from its sustained focus on going after premium customers, especially younger ones.

“Millennial and Gen Z customers continue to be the largest drivers of our growth, representing over 60% of proprietary consumer card acquisitions in the quarter and for the full year,” Chief Executive Stephen Squeri said on the company’s earnings call.

For Bill Smead, chief investment officer of the Smead Value Fund
SMVLX,
+0.55%
that counts Amex as a top-10 holding, the results helped validate a long-running thesis about the power of millennial spending.

“We just have felt for now five to six years that at some point in time the coalescing of the millennial group as the primary force of the economy would begin to be the overriding force of what happens in the economy,” he told MarketWatch.

There are 92 million millennials in the U.S., and as a whole the group is about seven years behind prior generations in hitting milestones like marriage, parenthood, and homeownership, he said. But as millennials mature, Amex is able to capture more of their spending on necessities, in his view.

“Where Amex is benefiting is they are the most popular credit card among millennials because millennials love to travel,” he said. “Now that they are getting married and having kids and buying houses and cars, they still lean into their Amex cards because now they have to travel on the points.”

Amex is taking an upbeat view of the year ahead. For the full year, the company expects to grow revenue by 15% to 17% and see $11.00 to $11.40 in earnings per share, both of which are ahead of what analysts were modeling. The FactSet consensus was for $58.82 billion, which would be about 11% above 2022 levels. Analysts were also expecting $10.53 in EPS.

The outlook is “above where we thought we would have been a year ago,” Chief Financial Officer Jeff Campbell told MarketWatch. It’s also “accompanied by a 15% increase in our dividend, which I think demonstrates confidence in our guidance.”

American Express intends to increase its quarterly dividend to 60 cents a share from 52 cents a share.

Campbell pointed to “strong spending patterns” in the U.S. and elsewhere, “including in places you might not expect, like Europe.”

American Express logged fourth-quarter net income of $1.57 billion, or $2.07 a share, compared with $1.72 billion, or $2.18 a share, in the year-ago quarter. The FactSet consensus was for $2.23 a share.

Quarterly revenue net of interest expense rose to $14.18 billion from $12.16 billion, while analysts were looking for $14.23 billion. Annual revenue came in at $52.86 billion.

See also: Visa rides a wave of spending to an earnings beat

American Express noted that total provisions for credit losses were $1.03 billion, compared with $53 million a year earlier. The increase reflects a $462 million reserve build, compared with a $168 million net reserve release a year before, along with higher net write-offs in the latest period.

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While American Express expected some uptrend in write-off and delinquency rates as the impact of pandemic-era stimulus benefits subsided, Campbell said that the metrics have trended up more slowly than he expected. These credit metrics are still below pre-pandemic levels, and Campbell doesn’t expect them to get back to pre-pandemic levels during 2023.

“That’s a contrast to what you have seen others say over the past few weeks,” he said. American Express has “an even more premium mix of customers” than it did when the pandemic began, he noted, helping to fuel the company’s optimism.

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Results from American Express follow those from Visa Inc.
V,
+2.99%
an afternoon earlier. In Smead’s view, Amex is half Visa, half JPMorgan Chase & Co.
JPM,
+0.24%,
since it’s both a processor and a bank. With banks stock trading at about 10 times earnings currently and processors trading at about 30 times earnings, that would suggest a business that was half Visa and half JPMorgan would warrant a 20-times multiple, but Amex shares are trading at about 15 times the midpoint of its 2023 earnings forecast.

“They have been spending a really long time not getting the respect they deserve,” Smead said of Amex.