Alliance Data shares fall on 3Q disappointment

Alliance Data shares fall on quarterly earnings disappointment, 2010 outlook

• On 2:49 pm EDT, Thursday October 22, 2009

BOSTON (AP) -- Shares of Alliance Data Systems Corp. tumbled on Thursday after analysts offered mostly negative assessments of the company's third-quarter results and earnings outlook for next year.

Shares of Alliance Data Systems fell $4.97, or about 7.4 percent, to $62.29 in afternoon trading. The stock hit a 52-week intraday high of $69.09 last Friday, and is still up sharply from a 52-week low of $22.76 in March.

The Dallas-based company provides private-label credit card services to retailers and wholesalers, including Victoria's Secret, Ann Taylor and Pottery Barn.

After markets closed Wednesday, Alliance Data Systems said its third-quarter profit fell 29 percent amid unfavorable currency exchange rates and a decline in sales.

The company earned $45.8 million, or 83 cents per share, in the quarter ended Sept. 30, down from the $64.8 million, or 93 cents per share, it earned a year earlier. Adjusted profit was $1.44 per share, beating a $1.34 per share consensus estimate of analysts polled by Thomson Reuters.

Fox-Pitt Kelton analyst Roger Smith maintained an "In Line" rating on the stock and reaffirmed his $68 price target. But he offered a mostly negative assessment of the third-quarter results, citing lighter-than-expected revenue and greater-than-expected interest expenses.

"Overall, we do not believe investors will look at this as a good quarter," Smith wrote in a research report.

In line with updated guidance that Alliance Data Systems offered on Wednesday, Smith increased his full-year earnings estimate to $5.15 per share from his earlier expectations of $5.12 per share, while lowering his 2010 estimate to $6 per share from $6.23.

On Thursday, analysts were forecasting a 2009 profit of $5.11, on average, and a 2010 profit of $6.03.

SunTrust Robinson Humphrey analyst Andrew Jeffrey remained "Neutral" on the stock and called Alliance Data Systems' quarterly results and 2010 earnings expectations "weak."

Jeffrey wrote in a research report that he expects the stock "will trade down sharply following its recent strong run as investors grapple with poor earnings quality, the company's conservative outlook and heightened investment spending plans."

But he said he would likely review whether to upgrade his rating of the stock if shares fall to the mid-$50s.

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