Can Alliance Data (ADS) Keep its Earnings Streak Alive?


We expect financial transaction service provider Alliance Data Systems Corporation (ADS) to beat expectations when it reports its second-quarter 2014 results on Jul 17.

Why a Likely Positive Surprise?

Our proven model shows that Alliance Data is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.17%. This is a meaningful and a leading indicator of a likely positive earnings surprise.

Zacks Rank: Alliance Data has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 and 3 have significantly higher chances of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.  

The combination of Alliance Data’s Zacks Rank #3 and +1.17% ESP makes us confident of an earnings beat this release.

What is Driving the Better-than-Expected Earnings?

We expect Alliance Data’s segments to continue with their solid momentum aiding better consolidated results.  Its inorganic story also seems impressive.

The dotz coalition loyalty program in Brazil continued its national rollout. dotz now operates in 10 regional markets and aims to enter three additional Brazilian markets by 2014.

Alliance Data buys back shares regularly which in turn aids the bottom line.

The positive trend is backed by the trailing two-quarter average surprise of 2.49%, much of which was contributed by the 2.7% surprise achieved in the first quarter. Solid performances across all its segments continue to aid the overall performance.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this coming quarter:  

Iron Mountain Inc. (IRM), earnings ESP of +14.71% and a Zacks Rank #2 (Buy)

Stantec Inc. (STN) earnings ESP of +3.61% and a Zacks Rank #2.

Visa Inc. (V), earnings ESP of +1.91% and a Zacks Rank #2.

Read the Full Research Report on V
Read the Full Research Report on IRM
Read the Full Research Report on ADS
Read the Full Research Report on STN

Zacks Investment Research

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