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Alliance Data (ADS) Q4 Earnings & Revenues Miss Estimates

Sapna Bagaria

Alliance Data Systems Corporation’s ADS fourth-quarter 2019 operating earnings of $4.12 per share missed the Zacks Consensus Estimate by 0.9%. The bottom line declined nearly 29% year over year.

Earnings were weighed down by restructuring and strategic transaction costs.

Shares of the company lost 0.61% in the pre-market trading session owing to lower-than- expected results.

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

 

Behind the Headlines

Alliance Data reported total revenues of $1.46 billion, flat year over year. The top line missed the Zacks Consensus Estimate by 2.7%.

Operating expenses increased 20.5% year over year to $1.15 billion.

Adjusted EBITDA (net of funding costs) declined 39% year over year to $278 million.

Full Year Results

The company reported earnings per share of $16.77, down 14% year over year. Revenues of $5.58 billion declined 2% year over year.

Segment Update

Card Services revenues were $1.13 billion, flat year over year. Adjusted EBITDA was $209.6 million, down 51% year over year.

LoyaltyOne revenues totaled $332 million, flat year over year. Adjusted EBITDA increased 19% to $80.3 million. AIR MILES reward miles issued was up 1% year over year.

The company incurred $33 million in restructuring and other charges.

Financial Update

As of Dec 31, 2019, cash and cash equivalents was $3.9 billion, up 1.5% from Dec 31, 2018-level.

At quarter end, debt level dropped 50.2% from 2018-end to $2.85 billion.

For the full year, the company generated cash from operations of $1.2 billion, down 24.4% year over year. Capital expenditure at Alliance Data declined 28.8% year over year to $142.3 million in the same period.

2020 Guidance

Alliance Data estimates core EPS of $20.5, indicating growth of 22% year over year. Revenues are expected to remain unchanged year over year at $5.6 billion.

Business Update

Alliance Data shifted its client base in Card Services toward faster growing companies and verticals by selling approximately $2.1 billion in non-strategic receivables. It divested  Epsilon and Precima units. The company extended the debt maturity ladder providing liquidity that can be used to re-invest in the business. A seasoned industry veteran, Ralph Andretta, was hired from Citigroup to lead the company.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the same space are Envestnet, Inc. ENV) , Global Payments Inc. GPN and  Fidelity National Information Services, Inc. FIS. Each of the stocks carries Zacks Rank #2 (Buy).

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

Envestnet, Global Payments and Fidelity National Information surpassed earnings estimates in each of the four trailing quarters, with positive surprise of 3.51%, 2.42% and 2.92%, on average, respectively.

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