On May 20, 2013, shares of Alliance Data Systems Corporation (ADS) hit a 52-week high of $180.54. The momentum was driven by a strong first quarter, which included a 4.9% positive surprise and enhanced guidance for 2013.
Alliance Data reported first-quarter 2013 earnings on Apr 18. Adjusted earnings of $2.55 per share comfortably surpassed the Zacks Consensus Estimate of $2.43. Results augmented approximately 7% year over year. Strong performances across all segments aided the upside.
Alliance Data raised its revenue expectation to $4.25 billion from $4.20 billion. The new guidance represents a 17% increase from the 2012 level. Organic revenue growth is projected to be around 7%. Core EPS was revised upward to $9.75 from $9.65. The new guidance represents a 12% year-over-year improvement. The Zacks Consensus Estimate of $9.39 per share lies within the company guided range.
With respect to earnings trend, Alliance Data delivered positive earnings surprise in all of the past 4 quarters, with an average of 3.25%.
Moreover, Alliance Data continues to ink long-term deals. Beginning May, the company signed an agreement to provide private label credit card services for multichannel computer and electronics retailer TigerDirect. In April, Alliance Data agreed to provide private label credit card services to luxury retailer Barneys New York. It also inked a multi-year agreement with The Ohio University Foundation/Ohio University Alumni Association to provide a co-brand credit card program for the alumni of Ohio University.
Additionally, valuation for Alliance Data looks attractive. Though the shares are trading at a premium to the peer group average both on a price-to-book basis and on a forward price-to-earnings basis, return on equity is substantially higher than the peer group average. Moreover, the 1-year return from the stock was 48.1%, much above the S&P’s return of 28.6%.
Alliance Data presently carries a Zacks Rank #3 (Hold). Financial transaction service providers like Vantiv, Inc. (VNTV) - Zacks Rank #1 (Strong Buy), Fidelity National Information Services, Inc. (FIS) - Zacks Rank #2 (Buy) and Official Payments Holdings, Inc. (OPAY) - Zacks Rank #2 (Buy), appear impressive.
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