Alliance Data Boosts Shareholder Value with $600M Buyback - Analyst Blog
The board of directors of Alliance Data Systems Corporation (ADS) approved a new share buyback program in a concerted effort to return more value to shareholders. The company, with the new approval, is now authorized to repurchase shares worth $600 million through 2015.
The recent approval replaces the earlier authorization that had $182.5 million remaining. The previous $400 million authorization was approved in Dec 2013. With the recent approval, the company’s share repurchase authorization has reached nearly $4.2 billion since the first quarter of 2008.
Alliance Data has never paid out, nor does it intend to make any dividend payment. It deploys its capital into share buybacks and/or strategic expansions. Through the first nine months of 2014, the company spent $217.5 million to buy back 0.9 million shares. A lower share count via share repurchases also add to the bottom line. Moreover, its sufficient liquidity, backed by solid operational performance, cushions buybacks. The company outperformed the Zacks Consensus Estimate in the last four reported quarters with an average beat of 4.02%.
This Zacks Rank #2 (Buy) financial transaction service provider has been witnessing very few estimate revisions. The new approval might encourage analysts to raise estimates, exerting upward pressure on Zacks Rank.
Alliance Data is expected to report its fourth-quarter and full-year 2014 earnings results in the first week of February. The Zacks Consensus Estimate is currently pegged at $3.11 for the fourth quarter and $11.74 for 2014. These represent year-over-year improvement of 39.3% for the fourth quarter and 24.4% for the full year. Alliance Data expects to deliver core earnings of $12.40 per share on revenues of $5.3 billion. Alliance Data has a track of beating expectations. We expect the momentum to continue on the strength of its solid performance across all segments.
Investors interested in the financial transaction service industry can take a look at Heartland Payment Systems, Inc. (HPY), Envestnet, Inc. (ENV) and Xoom Corporation (XOOM). While Heartland Payment sports a Zacks Rank #1 (strong Buy), Envestnet and Xoom Corporation share the Zacks Rank with Alliance Data.
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