The two financial stocks Karen Firestone favors coming out of earnings

Published Fri, Jan 27 20232:53 PM EST

Karen Firestone of Aureus Asset Management is excited about American Express and Visa coming off their earnings reports this week as the pair highlighted consumer resiliency even as economic data shows warning signs. Data released Friday showed consumer spending, adjusted for inflation, declined 0.2% in December from the prior month. That was a slightly larger drop than the 0.1% analysts polled by Dow Jones expected. That means consumer spending slowed at the end of 2022, stoking fears of a recession ahead. Still, Firestone said on CNBC's "Halftime Report" Friday that earnings from the two credit card companies released this week paint a brighter picture of consumers. She pointed to American Express' message that young people were spending more. Firestone also said the company raising its guidance was "very impressive." American Express reported record spending on its network during the fourth quarter. Management said that while its consumer base, which tends to have higher incomes, isn't immune to an economic downturn, they were still spending even as concerns of a slowdown mounted. On the other hand, the company missed fourth-quarter earnings and revenue estimates. Loan loss provisions were higher than expected, but management said it's a result of loan balances rising rather than a sign of weakening consumer health. Management also noted the figure was still below pre-pandemic levels. "It looks as if it's a pre-pandemic, 2019-type of release," Firestone said. While she said it "wasn't a perfect quarter," the release "shows how the market embraces good news." Firestone also called the stock "cheap" with room to rise. Shares are up 11% on Friday. AXP 3M mountain American Express shares have gained nearly 18% so far this year. On the flip side, she said Visa is a more expensive stock, but its focus on innovation keeps her bullish. Firestone said the company has been able to capitalize on the transition to credit from other payment forms. "It's financial, but it's also tech," she said. "We think it's just a fantastic, well-run company. And it keeps putting up the numbers and so the stock is going higher." Management said on its earnings call Thursday that both international travel and resilient consumer spending helped Visa in the quarter. The company beat analyst fiscal first-quarter expectations on the top and bottom lines, but offered a conservative revenue forecast for the second quarter. Visa shares were up more than 3% in trading Friday. V 3M mountain Visa shares have gained more than 11% since the start of this year. Despite Friday's consumer spending data, Cerity Partners' Jim Lebenthal said the two companies, along with MasterCard , do not show signs of a weakening consumer at the moment. Lebenthal, a partner at the firm, said these companies are a microcosm of corporate America, which he said is preparing for a recession that has not yet materialized. "All three of these guys are preparing for what could happen, but they're just not seeing any signs of it yet," he said. "It just has to come to the punch line: There are no signs of the recession yet." — CNBC's Kate Rooney contributed to this report