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What's in Store for Alliance Data (ADS) in Q2 Earnings?

Zacks Equity Research

Alliance Data Systems Corporation ADS is slated to report second-quarter 2019 results on Jul 18, before market open. The company delivered positive surprise in three of the last four reported quarters.

Let’s see how things are shaping up for this announcement.

Alliance Data’s second-quarter results are likely to benefit from strong performance of Card Services and LoyaltyOne segments.

Card Service, accounting for more than half of the company’s revenues, are likely to benefit from deal wins from both new and existing clients, diversifying the portfolio into high-growth verticals. However, decline in non-core clients might weigh on results. The Zacks Consensus Estimate for second quarter average receivable is $16.9 billion, indicating a decline of 5.3% year over year.

The Zacks Consensus Estimate for EBITDA is pegged at $317 million, indicating a decline of 5.7% from the year-ago reported figure. Revenues are estimated to be $1.126 billion, implying a decline of 2% from the year-ago quarter reported figure.

LoyaltyOne should continue to benefit from BrandLoyalty, driven by growth across Europe, Asia, the United States as well as the company’s expansion efforts in Canada. The Zacks Consensus Estimate for EBITDA is pegged at $65 million, indicating a decline of 7.1% from the year-ago reported figure. Revenues are estimated to be $224 million, implying a decline of 10% from the year-ago quarter reported figure.

Promotional activities are likely to help improve AIR MILES issued in the to-be-reported quarter.

However, expenses are likely to increase due to strategic initiatives including expansion efforts, which may weigh on operating margins.

Share buybacks are however likely to provide a boost to the bottom line.

The Zacks Consensus Estimate for revenues is pegged at $1.4 billion, indicating a decline of 28.7% from the year-ago reported figure. The consensus mark for earnings per share is pegged at $4.16, suggesting a decline of 17% from the year-ago quarter reported figure.

What Our Quantitative Model States

Our proven model does not conclusively show that Alliance Data is likely to beat on earnings in to-be reported quarter. This is because the stock does not have the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP: Alliance Data has an Earnings ESP of -2.62%. This is because the Most Accurate Estimate is pegged at $4.05, lower than the Zacks Consensus Estimate of $4.16. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Alliance Data carries a Zacks Rank #4 (Sell). .Zacks Rank #4 or 5 (Strong Sell) stocks should never be considered going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks from the finance sector that have the perfect mix of elements to surpass estimates this time around are as follows:

Fiserv, Inc. FISV is set to report second-quarter earnings on Jul 30 and has an Earnings ESP of +0.56%. The company carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here

Chubb Limited CB has an Earnings ESP of +1.30% and a Zacks Rank #3. The company is slated to announce second-quarter earnings on Jul 23.

RenaissanceRe Holdings Ltd. RNR has an Earnings ESP of +11.00% and a Zacks Rank of 1. The company is set to report second-quarter results on Jul 23.

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RenaissanceRe Holdings Ltd. (RNR) : Free Stock Analysis Report
 
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