Alliance Data Systems Corporation’s operating earnings of $3.59 per share in the second quarter of 2017 surpassed the Zacks Consensus Estimate of $3.47. Earnings improved 4.3% year over year.
All the segments – Epsilon, LoyaltyOne and Card Services delivered a solid performance in the quarter.
Behind the Headlines
Alliance Data’s revenues came in at $1.82 billion, up 4% year over year. The top line missed the Zacks Consensus Estimate of $1.84 billion.
Operating expenses increased 2.9% year over year to $1.5 billion, primarily due to a rise in provision for loan losses. Operating income improved 9.6% year over year to $351.4 million.
However, adjusted earnings before interest tax depreciation and amortization (EBITDA) were $499 million, up 6% year over year.
Segment Update
LoyaltyOne: Revenues totaled $280 million, down 21% year over year. Adjusted EBITDA declined 28% to $56.7 million. AIR MILES’ saw its reward miles issued decreased 1% while redeemed declined 13%.
Epsilon: Revenues were $543.3 million in the quarter, up 5% year over year. Adjusted EBITDA increased 4% year over year to $106.8 million. The quarter witnessed growth in core product offerings revenues (Auto, CRM, Agency).
Card Services: Revenues came in at $1 billion, up 13% year over year. Adjusted EBITDA was $305 million, up 11% year over year. Average credit card receivables, excluding amounts reclassified as assets held for sale, advanced 17% year over year to $15.7 billion. Net principal loss rates for the reported quarter were 6.2%, up 110 basis points year over year, chiefly due to lower recovery rates.
Financial Update
As of Jun 30, 2017, cash and cash equivalents were $1.96 billion compared with $1.86 billion as of Dec 31, 2016.
At the end of the quarter, debt climbed 12.5% from 2016-end to $6.4 billion.
Capital expenditure at Alliance Data decreased 8.5% year over year to $116.8 million in the first half of 2017.
Guidance
Alliance Data projects 2017 core earnings to be $18.10 per share, lowered from $18.50 per share, guided earlier. Revenues of $7.8 billion are raised from $7.7 billion, guided earlier.
For 2018, the company expects a core EPS of $21.50 on revenues of $8.7 billion. While bottom line reflects a 19% year over year growth, top line represents a 12% increase over 2017.
Zacks Rank and Other Stocks
Alliance Data carries a Zacks Rank #4 (Sell).
American Express Co. (AXP - Free Report) and Visa Inc (V - Free Report) from the same space also came up with flying colors, with bottom-lines beating their respective Zacks Consensus Estimate in the reported quarters
A better ranked financial transaction service provider MasterCard Inc (MA - Free Report) with Zacks Rank #2 is set to release its second quarter results next week.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Alliance Data Systems Corporation’s operating earnings of $3.59 per share in the second quarter of 2017 surpassed the Zacks Consensus Estimate of $3.47. Earnings improved 4.3% year over year.
All the segments – Epsilon, LoyaltyOne and Card Services delivered a solid performance in the quarter.
Behind the Headlines
Alliance Data’s revenues came in at $1.82 billion, up 4% year over year. The top line missed the Zacks Consensus Estimate of $1.84 billion.
Operating expenses increased 2.9% year over year to $1.5 billion, primarily due to a rise in provision for loan losses. Operating income improved 9.6% year over year to $351.4 million.
However, adjusted earnings before interest tax depreciation and amortization (EBITDA) were $499 million, up 6% year over year.
Segment Update
LoyaltyOne: Revenues totaled $280 million, down 21% year over year. Adjusted EBITDA declined 28% to $56.7 million. AIR MILES’ saw its reward miles issued decreased 1% while redeemed declined 13%.
Epsilon: Revenues were $543.3 million in the quarter, up 5% year over year. Adjusted EBITDA increased 4% year over year to $106.8 million. The quarter witnessed growth in core product offerings revenues (Auto, CRM, Agency).
Card Services: Revenues came in at $1 billion, up 13% year over year. Adjusted EBITDA was $305 million, up 11% year over year. Average credit card receivables, excluding amounts reclassified as assets held for sale, advanced 17% year over year to $15.7 billion. Net principal loss rates for the reported quarter were 6.2%, up 110 basis points year over year, chiefly due to lower recovery rates.
Financial Update
As of Jun 30, 2017, cash and cash equivalents were $1.96 billion compared with $1.86 billion as of Dec 31, 2016.
At the end of the quarter, debt climbed 12.5% from 2016-end to $6.4 billion.
Capital expenditure at Alliance Data decreased 8.5% year over year to $116.8 million in the first half of 2017.
Guidance
Alliance Data projects 2017 core earnings to be $18.10 per share, lowered from $18.50 per share, guided earlier. Revenues of $7.8 billion are raised from $7.7 billion, guided earlier.
For 2018, the company expects a core EPS of $21.50 on revenues of $8.7 billion. While bottom line reflects a 19% year over year growth, top line represents a 12% increase over 2017.
Zacks Rank and Other Stocks
Alliance Data carries a Zacks Rank #4 (Sell).
American Express Co. (AXP - Free Report) and Visa Inc (V - Free Report) from the same space also came up with flying colors, with bottom-lines beating their respective Zacks Consensus Estimate in the reported quarters
A better ranked financial transaction service provider MasterCard Inc (MA - Free Report) with Zacks Rank #2 is set to release its second quarter results next week.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Will You Make a Fortune on the Shift to Electric Cars?Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It's not the one you think. See This Ticker Free >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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