Alliance Data Hits 52-Week High


On Mar 28, 2013, shares of Alliance Data Systems Corporation (ADS) hit a 52-week high of $162.07. The company is continuosuly signing long-term agreements, which along with the renewal of the existing ones will further enhance its performance.

Previously, Alliance Data had reported fourth-quarter results with an earnings surprise of 2.4%. This financial transaction service provider witnessed positive earnings surprises in all four quarters of 2012, with an average beat of 4.1%.

Over the recent past, the Retail Service Business of Alliance Data inked a couple of new deals. In February end, this business segment entered into a long-term renewal agreement with Gander Mountain to continue with the co-brand credit card program service. More recently, it signed an agreement with Caesars Entertainment Corporation (CZR) to launch a new Total Rewards credit card.

Further, its Epsilon division inked a long-term renewal agreement with Carlson Rezidor Hotel Group to continue providing email marketing services for the latter in the Americas and Asia-Pacific.

The company’s Canadian loyalty business signed a new multi-year agreement with Staples Canada Inc.

On Jan 31, Alliance Data reported fourth-quarter 2012 operating income of $1.84 per share, surpassing the Zacks Consensus Estimate of $1.68 and improving 8% year over year. Better-than-expected results based on strong performances across all segments augmented the results.

Valuation for Alliance Data looks attractive. Though the shares are trading at a premium to the peer group average, return on equity is significantly higher than the peer group average both on a price-to-book basis and on a forward price-to-earnings basis. The 1-year return from the stock is 28.5%, much above S&P’s return of 11.4%.   

Continued focus on strategic acquisitions to grow inorganically, the national rollout of its dotz coalition loyalty program in Brazil, and inking long-term deals are expected to drive sold numbers ahead. The company also has a new $400 million share buyback program under its authorization. The overall long-term sales are likely to be 14.8% and 14.3%, respectively.

Alliance Data presently carries a Zacks Rank # 2 (Buy). Financial transaction service providers like Total System Services, Inc. (TSS) and Vantiv, Inc. (VNTV) among others, carry a favorable Zacks Rank # 2 and appear impressive.

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