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Alliance Data's Strategic Initiatives Impress; High Costs a Drag
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On Aug 29, 2016, we issued an updated research report on Alliance Data Systems Corporation .
Alliance Data remains focused on boosting its card service segment. In keeping with this, the company recently signed a new long-term agreement to provide private label and co-branded credit card services for Ulta Beauty. Card Services continues to deliver double-digit revenue and EBITDA growth. In fact, the second quarter marked the 17th straight quarter of such achievement. With a solid pipeline of new partnerships, Alliance Data anticipates sales gains to be 20% or more in the next several years.
Alliance Data’s inorganic portfolio has improved substantially over the last few years owing to several strategic acquisitions. In its recent endeavor, the company acquired the remaining 20% ownership in the Netherlands-based BrandLoyalty Group. Alliance Data had acquired the majority ownership interest in BrandLoyalty in Jan 2014 to enhance its LoyaltyOne business.
A sustained solid operational performance has been strengthening the company’s capital position. This, is turn, has been aiding the company to engage in shareholder friendly moves. The company expects $1 billion worth shares in 2016, of which only $460 million is left under its authorization.
Alliance Data Systems has been witnessing impressive growth on the back of solid operational results across all segments. This Zacks Rank #3 (Hold) financial transaction service provider delivered positive surprise in three of the last four quarters with an average beat of 1.39%. The expected long-term earnings growth for the company is pegged at 13.7%.
However, Alliance Data has been experiencing escalating expenses, which have been weighing on margin expansion. Also, in case of higher-than-expected actual redemptions by AIR MILES Reward Program or an increase in costs related to redemption of AIR MILES reward miles, profitability will likely be affected.
Additionally, Alliance Data's dependence on a limited number of clients to generate a major portion of its revenues remains a concern. This is because the company’s failure to retain any of these clients will weigh on the top line.
Zacks Rank and Stocks to Consider
Presently, Alliance Data carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the finance sector are WEX Inc. (WEX - Free Report) , JetPay Corporation and Allied World Assurance Company Holdings, AG (AWH - Free Report) . While both WEX Inc. and Allied World Assurance sport a Zacks Rank #1 (Strong Buy), JetPay Corporation holds a Zacks Rank #2 (Buy).
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Alliance Data's Strategic Initiatives Impress; High Costs a Drag
On Aug 29, 2016, we issued an updated research report on Alliance Data Systems Corporation .
Alliance Data remains focused on boosting its card service segment. In keeping with this, the company recently signed a new long-term agreement to provide private label and co-branded credit card services for Ulta Beauty. Card Services continues to deliver double-digit revenue and EBITDA growth. In fact, the second quarter marked the 17th straight quarter of such achievement. With a solid pipeline of new partnerships, Alliance Data anticipates sales gains to be 20% or more in the next several years.
Alliance Data’s inorganic portfolio has improved substantially over the last few years owing to several strategic acquisitions. In its recent endeavor, the company acquired the remaining 20% ownership in the Netherlands-based BrandLoyalty Group. Alliance Data had acquired the majority ownership interest in BrandLoyalty in Jan 2014 to enhance its LoyaltyOne business.
A sustained solid operational performance has been strengthening the company’s capital position. This, is turn, has been aiding the company to engage in shareholder friendly moves. The company expects $1 billion worth shares in 2016, of which only $460 million is left under its authorization.
Alliance Data Systems has been witnessing impressive growth on the back of solid operational results across all segments. This Zacks Rank #3 (Hold) financial transaction service provider delivered positive surprise in three of the last four quarters with an average beat of 1.39%. The expected long-term earnings growth for the company is pegged at 13.7%.
However, Alliance Data has been experiencing escalating expenses, which have been weighing on margin expansion. Also, in case of higher-than-expected actual redemptions by AIR MILES Reward Program or an increase in costs related to redemption of AIR MILES reward miles, profitability will likely be affected.
Additionally, Alliance Data's dependence on a limited number of clients to generate a major portion of its revenues remains a concern. This is because the company’s failure to retain any of these clients will weigh on the top line.
Zacks Rank and Stocks to Consider
Presently, Alliance Data carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the finance sector are WEX Inc. (WEX - Free Report) , JetPay Corporation and Allied World Assurance Company Holdings, AG (AWH - Free Report) . While both WEX Inc. and Allied World Assurance sport a Zacks Rank #1 (Strong Buy), JetPay Corporation holds a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7Best Stocks for the Next 30 Days. Click to get this free report >>