AmEx Surpasses Profit Estimates; Focus on Small-Business Strategy

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American Express is set to exceed expectations for first-quarter profit, thanks to robust spending by affluent consumers. While the company’s focus on high-income clientele shielded it from economic turbulence, executives highlighted the need to re-engage with U.S. small business customers, where growth has been more subdued.

In the U.S., consumer spending surged by 8% compared to last year, while international consumer spending saw an even stronger increase of 14%. However, spending by U.S. small and medium-sized enterprises (SMEs) only rose by 1%. CEO Stephen Squeri noted the softness in SME spending but expressed optimism about its potential for future growth.

Analysts commended AmEx’s concentration on premium consumers and SMEs, which has allowed the company to weather economic challenges better than its competitors. William Blair analyst Cristopher Kennedy praised AmEx’s strategic focus and highlighted several growth levers supporting its ambitious revenue targets.

AmEx maintained its revenue growth expectations of 9% to 11% and a profit forecast of $12.65 to $13.15 a share for 2024. The company’s first-quarter profit soared by 31% to $2.44 billion, or $3.33 a share, surpassing analysts’ average expectation.

Looking ahead to the investor day on April 30, CEO Squeri indicated discussions about the company’s strategy for its premium consumer base and small business sector. Additionally, the revenue potential associated with Gen Z and millennial customers will be a key focus.

Despite the impending merger between Capital One Financial and Discover Financial, which would create the largest credit card issuer in the U.S., AmEx remains unfazed. CFO Christophe Le Caillec emphasized the company’s commitment to executing its successful strategy regardless of industry shifts.

Following the positive earnings report, American Express shares rose by 4.8% to $224.86, reflecting investor confidence in the company’s performance and strategic direction.