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Alliance Data (ADS) Q1 Earnings Miss, Revenues Down Y/Y

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Alliance Data Systems Corporation’s operating earnings of $3.55 per share for the first quarter of 2019 missed the Zacks Consensus Estimate of $3.76. The bottom line declined 13.4% year over year.

Behind the Headlines

Alliance Data reported total revenues of $1.3 billion, down 3% year over year. The downside was due to lower revenues from its LoyaltyOne and Card Services segments.

Operating expenses declined 3.2% year over year to $977.3 million. Operating income decreased 4.2% year over year to $356.9 million largely due to lower revenues.

Adjusted EBITDA (net of funding costs) declined 9% year over year to $317 million.

Alliance Data Systems Corporation Price, Consensus and EPS Surprise

Segment Update

LoyaltyOne: Revenues totaled $204 million, declining 10% year over year. Adjusted EBITDA increased 2% to $55 million. AIR MILES reward miles issued increased 3% on grocery vertical strength. AIR MILES reward miles redeemed declined 8%.
 
Card Services: Revenues were $1.13 billion, down 2% year over year. Adjusted EBITDA was $295 million, down 7% year over year.

The Epsilon segment was reclassified as Discontinued Operations due to pending sale to Publicis.

Financial Update

As of Mar 31, 2019, cash and cash equivalents was $3.7 billion, down 3.5% from Dec 31, 2018-level.

At quarter end, debt level was up 2.7% from 2018-end to $5.9 billion.

Cash from operations decreased 6% year over year to $610.8 million in the quarter. Capital expenditure at Alliance Data declined 13.4% year over year to $38.7 million in the same period.

Dividend Update

The board of directors approved 63 cents in quarterly dividend, payable on Jun 18, 2019 to stockholders of record as of May 14, 2019.

2019 Guidance Updated

Taking into effect the divestiture of Epsilon, the company estimates revenues to be $5.84 billion, up 4% from 2018. Core EPS is estimated to be $18.47, down 4% from 2018.

Divestiture of Epsilon

On Apr 14, 2019, Alliance Data inked a deal to sell its Epsilon business to Publicis Groupe for $4.4 billion in cash. The transaction is expected to be completed by the third quarter of 2019, subject to closing conditions. (Read more: Alliance Data to Divest Epsilon to Publicis for $4.4B in Cash).

Zacks Rank

Alliance Data currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Another Financial Transaction Service Release

The bottom line at Visa Inc. (V - Free Report) outpaced the Zacks Consensus Estimate for the fiscal second quarter of 2019.

Upcoming Releases

FleetCor Technologies, Inc. is slated to release first-quarter earnings on May 2. It has a positive Earnings ESP of +0.38% and a Zacks Rank of 2. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Evertec, Inc. (EVTC - Free Report) has an Earnings ESP of +3.73% and a Zacks Rank #3. The company is set to report first-quarter earnings on May 1.

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