Alliance Data Systems (ADS)
have been saving more of
their money as of late, but at the same time consumer credit is
increasing. Revolving credit lines are
on the rise and based on overall data, the US consumer is getting just
the strengthening consumer,
the average corporation is seeing a small boost in revenues and maybe
are likely to spend a bit to increase their sales and retention of
turn, consumers may be a little more willing to spend some of that
case” money on goods and services.
the financial crises of 2008-09,
credit all but dried up and corporate profits plummeted. As
the world continues along its slow
recovery, companies like Alliance Data are providing credit, marketing
retention solutions that keep the customer engaged and
the increase we are seeing in
consumer credit and confidence, it could be a sign that things are set
improve at ADS as well.
Alliance Data is an international provider of data-driven and
marketing and customer loyalty solutions.
Formed in 1996, they have nearly 9,000 employees and are based just
outside of Dallas, TX.
The company is split into
three businesses; Retail services, LoyaltyOne and Epsilon.
they provide a suite of diverse
services to their clients. They offer private
label, co-brand and commercial credit card programs, one-to-one and
loyalty programs and loyalty consulting.
In addition, ADS provides consumer database marketing, permission-based
email marketing, data services and creative agency services.
You may have come across ADS
if you have a loyalty card from Walgreens, a player’s card from MGM
Casinos or subscribe to their Air Miles reward program which is based
among many others.
a research note, ADS said “ we [know] that understanding subtle
would help us better relate to customers – and ultimately, help our
partners sell more to them.” I think
that sums up their business model well.
ADS recently signed
a multi-year renewal agreement with “Buckle” and on February 2nd, beat estimates and announced
strong guidance for FY2012. All of which sent shares higher and brought the
stock closer to a Zacks Rank 1
ADS is a mid-cap (6.07billion) company that is trading at about 15.15
(expectations for next quarter) earnings.
became a Zacks Rank 1 strong buy
on February 27th, 2011.
Data reported a quarterly
sales increase of only 0.33% at their last earnings report and saw a
in EPS for the same period (mostly due to dilution of
sales were up 12% compared to (fiscal) FY2010 with total sales of
billion in FY2011. ADS earnings increased from $3.69 in
FY2010 to $6.22 in FY2011 and are expected to earn $8.02 in FY2012
the Zacks Consensus Estimate.
Alliance Data guided 2012 earnings higher
than expectations during their last report.
Strong performance across all the segments and share buyback helped
Alliance Data to post better-than-expected results.
reported that operating income
increased 29% year over year to $181.3 million in the quarter while
operating income increased 29.2% over 2010.
EBITDA in the last quarter were $230.8 million, up 19% year over year,
thanks to solid results across all the segments. Fiscal 2011 EBITDA
23% over 2010.
has surprised analysts to
the upside 4 quarters in a row at an average of 15.47%.
the 13 analysts who cover ADS,
the consensus is for the company to grow earnings by 11% in the current
(FY2012) and roughly 13.5% in FY2013.
In terms of the magnitude of
analyst estimate trends, we are seeing all of the consensus estimates
than they were 90 days ago for the next quarter as well as FY2012 and
the current quarter has seen some downward adjustments.
Market Performance &
ADS has been bullish throughout the past 12 months. It took a
sharp, quick break in August of
2011 with the rest of the market, but has been making a series of
and higher highs since that point.
stock has maintained above its 200 day
moving average, even during the downturns and is currently above both
and 200 day averages of $98.64 and $110.44 respectively.
has exceeded the S&P 500’s
performance in the past year by almost 50% and outpaced it by over 8%
past 3 months during its recent rally. The
stock remains in a bullish trend and has maintained its momentum in the
leading the index by about 5%.
has a beta of 1.52, which can
add some volatility to the stock when compared to the broad
The only substantial support the stock has is
right around the 50 day moving average of $112.
A Levy is the
Momentum Stock Strategist for Zacks.com. He is also the Editor in
charge of the
Whisper Trader Service.