American Express Co., this year's worst performer in the Dow Jones Industrial Average, said first-quarter profit rose 6.5% as expenses declined.
Chief Executive Officer Ken Chenault is under pressure to demonstrate how Amex can recover from setbacks including the end of a partnership with Costco Wholesale Corp. In recent months, he has announced co-brand deals, rewards programs and technology investments while emphasizing lending products and efforts to expand beyond the company's affluent consumer base.
"With the loss of several key affiliate relationships and a somewhat related pickup in marketing expenses, we expect a moderate degree of earnings volatility," John Hecht, an analyst at Jefferies Group LLC, said in a note before the results were announced. "The company is positioned for the remainder of the year to focus on aggressive investments in order to stimulate growth."
Net income climbed to $1.53 billion, or $1.48 a share, from $1.43 billion, or $1.33, a year earlier, the New York-based company said today in a statement. The average estimate of 14 analysts surveyed by Bloomberg was for profit of $1.37 a share.
Amex gained 1.5% to $80.91 at 4 p.m. in New York. The shares have fallen 13% this year, compared with the 1.6% advance of the 30-company Dow.
The lender, which fell short of its revenue-growth goals last year, will probably post earnings that are little changed or slightly down this year following the loss of Costco, Chenault has said. The partnership with Costco, the largest U.S. warehouse-club chain, accounted for 20% of Amex's worldwide loans and 8% of customer spending.
Amex also is ending its relationship with JetBlue Airways Corp., and it lost an antitrust ruling that would let merchants steer customers to cheaper cards, something that could threaten the firm's ability to charge higher merchant fees.
The lawsuit, which Amex is appealing, is "potentially transformative to the company," according to Portales Partners LLC analyst William Ryan. "Should the company's premium pricing be eroded, the company will basically begin to look more like its peers."