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Can Alliance Data (ADS) Retain Earnings Beat Streak in Q1?

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Alliance Data Systems Corporation (ADS - Free Report) is slated to report first-quarter 2021 results on Apr 29, before the opening bell. The company beat estimates in three of the trailing four quarters and missed the same once.

Factors to Note

Lower card receivables and reduction in card yields stemming from rate cuts by Fed are likely to have weighed on the Card Services segment’s performance in the to-be-reported quarter. Notably, this segment contributes significantly to the company’s top-line growth. Evidently, the Zacks Consensus Estimate for first-quarter average receivables is pegged at $15.8 billion, which indicates a decline of 13.6% from the prior-year quarter.

The Zacks Consensus Estimate for revenues at the Card Services segment stands at $891 million, suggesting a slump of 24.7% from the year-ago quarter. Nevertheless, the consensus estimate for EBITDA at this segment is pegged at $324 million, which more than doubled from the prior-year quarter’s reported figure.

Also, credit sales are likely to have improved courtesy of the gradual economy recovery and improving consumer spending in the to-be-reported quarter. Solid and persistent card member payment behavior, and rise in delinquency rates year-over-year are likely to have led to lower loss rate in the first quarter. Per the company’s last earnings call, net loss rate is anticipated to be equal to or lower than 6% in the to-be-reported quarter.

Furthermore, lesser availability of short-term loyalty programs due to the COVID-19 pandemic might have hurt the performance of the company’s LoyaltyOne segment in the first quarter. The Zacks Consensus Estimate for first-quarter revenues at this segment stands at $186 million, indicating a decline of 6.1% from prior-year quarter’s reported figure.

Softer revenues at both the segments are likely to have dampened the company’s revenues in the to-be-reported quarter. The Zacks Consensus Estimate for first-quarter revenues is pegged at $1.1 billion, suggesting a decline of 22% from the prior-year quarter's reported figure.

Moreover, expenses are likely to have remained elevated in the first quarter due to significant investments undertaken by the company for boosting digital innovation and technology advancements. Nevertheless, tactical cost savings efforts are likely to have contributed to the company’s margin in the to-be-reported quarter.

Notably, the Zacks Consensus Estimate for earnings per share is pegged at $3.23, which indicates an increase to more than four-fold from the year-ago quarter’s reported figure.

What Our Quantitative Model Unveils

Our proven model predicts an earnings beat for Alliance Data this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: Alliance Data has an Earnings ESP of +7.39%. This is because the Most Accurate Estimate of $3.47 is pegged higher than the Zacks Consensus Estimate of $3.23. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Alliance Data carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks to Consider

Some other stocks worth considering from the financial transaction services industry with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:

EVO Payments, Inc. (EVOP - Free Report) has an Earnings ESP of +12.64% and a Zacks Rank #3.

Fidelity National Information Services, Inc. (FIS - Free Report) has an Earnings ESP of +2.01% and a Zacks Rank #3.

WEX Inc. (WEX - Free Report) has an Earnings ESP of +1.77% and a Zacks Rank of 3.

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