Alliance Data (ADS) Q3 Earnings Meet, '18 Revenue View Cut
Alliance Data Systems Corporation’s ADS operating earnings of $6.26 per share in the third quarter of 2018 were in line with the Zacks Consensus Estimate. The bottom line improved 17% year over year on strength in Card Services and LoyaltyOne segments.
Alliance Data Systems Corporation Price, Consensus and EPS Surprise
Alliance Data Systems Corporation Price, Consensus and EPS Surprise | Alliance Data Systems Corporation Quote
Behind the Headlines
Alliance Data generated total revenues of $1.9 billion, up 2% year over year. Pro forma revenues, which adjust for the change to net revenue presentation for AIR MILES effective Jan 1, 2018, improved 5% year over year to $2.02 billion. The top line marginally missed the Zacks Consensus Estimate of $2.06 billion.
Operating expenses dropped 0.6% year over year to $1.4 billion primarily because of higher provision for loan loss and depreciation and amortization. Operating income increased nearly 9% year over year to $522 million.
Adjusted EBITDA (net of funding costs) rose 2% year over year to $563 million.
Segment Update
LoyaltyOne: Revenues totaled $329 million, improving 8% year over year. Adjusted EBITDA grew 4% to $63 million. AIR MILES’ reward miles issued increased 3% while AIR MILES’ reward miles redeemed ticked up 1%.
Epsilon: Revenues totaled $538 million in the quarter under review, down 4% year over year because of lower margin pass-through agency business and site-based display product offerings. Adjusted EBITDA of $125 million was in line with the year-ago quarter.
Card Services: Revenues came in at $1.2 billion, up 10% year over year. Adjusted EBITDA was $414 million, up 4% year over year.
Financial Update
As of Sep 30, 2018, cash and cash equivalents were $3.6 billion, down 14% from Dec 31, 2017-level of $4.2 billion.
At the end of the third quarter, debt level was down 4.5% to $5.8 billion from 2017-end.
Cash from operations improved 15.2% year over year to $2 billion in the first three quarters while capital expenditure at Alliance Data declined 15.5% year over year to $149.3 million in the same period.
2018 Guidance
The company continues to expect core EPS between $22.50 and $23.00, up 16% to 19% over the 2017 tally.
Net revenues are expected at $7.9 billion while pro-forma revenues are estimated to be $8.2 billion. These estimates were lowered from the earlier guidance to account for continued weakness in certain Epsilon product offerings and the initial impact of strategic initiatives.
Zacks Rank
Alliance Data carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks That Warrant a Look
Some players from the same space poised to beat on earnings per the proven Zacks model are:
Cardtronics plc CATM is set to report third-quarter earnings on Nov 1. The company has an Earnings ESP of +2.79% and a Zacks Rank of 1.
WEX Inc. WEX is set to report third-quarter earnings on Oct 31. This #2 (Buy) Ranked stock has an Earnings ESP of +0.49%.
Visa, Inc. V has an Earnings ESP of +0.43%. This #2 Ranked company is set to report fiscal fourth-quarter earnings on Oct 31.
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