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Alliance Data (ADS) Q2 Earnings Miss Estimates, Down Y/Y

Zacks Equity Research

Alliance Data Systems Corporation’s ADS operating earnings of $3.83 per share for the second quarter of 2019 missed the Zacks Consensus Estimate of $4.12. The bottom line declined 12% year over year.

Soft performance of the Card Service segment weighed on the results.

Behind the Headlines

Alliance Data reported total revenues of $1.3 billion, down 3% year over year. The downside was due to lower revenues from Card Services segment.

Operating expenses increased 1.1% year over year to $1 billion. Operating income decreased 15% year over year to $337.3 million largely due to lower revenues and higher expenses.

Adjusted EBITDA (net of funding costs) declined 15% year over year to $310 million.

Alliance Data Systems Corporation Price, Consensus and EPS Surprise

Alliance Data Systems Corporation Price, Consensus and EPS Surprise

Alliance Data Systems Corporation price-consensus-eps-surprise-chart | Alliance Data Systems Corporation Quote

Segment Update

LoyaltyOne: Revenues totaled $251 million, up 1% year over year. Adjusted EBITDA decreased 27% to $51 million. AIR MILES reward miles issued decreased 2% due to less promotional activity in the grocery vertical. AIR MILES reward miles redeemed declined 2%.
 
Card Services: Revenues were $1.1 billion, down 4% year over year. Adjusted EBITDA was $287 million, down 14% year over year.

Financial Update

As of Jun 30, 2019, cash and cash equivalents was $4 billion, up 5.5% from Dec 31, 2018-level.

At quarter end, debt level was up 1.8% from 2018-end to $5.8 billion.

Cash from operations decreased 17.6% year over year to $1.1 billion in the first six months of the year. Capital expenditure at Alliance Data declined 6.4% year over year to $92.2 million in the same period.

Dividend Update

The board of directors approved quarterly dividend of 63 cents, payable on Sep 26, 2019 to stockholders of record as of Sep 4, 2019.

2019 Guidance

Alliance Data estimates revenues to be $5.8 billion, up 4% from 2018. Core EPS is estimated to be $19.50 -$19.75, down 1% from 2018.

Business Update

On Jul 1, Alliance Data divested Epsilon business to Publicis Groupe. The net proceeds are expected to be used to retire $2.4 billion of corporate debt and repurchase up to $1.1 billion of shares. The company modified Dutch auction to purchase $700 to $750 million worth of common shares.

The company also acquired several client portfolios aggregating over $900 million in June, which were expected to occur later in the year.

Zacks Rank

Alliance Data currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Visa Inc. V is set to report fiscal third quarter results on Jul 23. The Zacks Consensus Estimate for earnings is pegged at $1.33, up 10.8% year over year.

Evertec EVTC is set to report second-quarter earnings on Jul 31. The Zacks Consensus Estimate for earnings is pegged at 48 cents, suggesting 4.4% year-over-year increase.

FleetCor Technologies FLT is slated to release second-quarter earnings on Aug 1. The Zacks Consensus Estimate for earnings is pegged at $2.79, indicating 8.6% year-over-year increase.

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