Alliance Data Systems Corporation is scheduled to report third-quarter 2021 results on Oct 28, before the opening bell. The company beat estimates in each of the trailing four quarters.

Factors to Note

Reduced loan loss provision expense, continued strong card member payment behavior, improvement in the delinquency rates and higher finance charges are likely to have driven the Card Services segment’s performance in the to-be-reported quarter.

The Zacks Consensus Estimate for third-quarter revenues at the Card Services segment stands at $899 million, which indicates an improvement of 3.8% from the prior-year quarter.  The consensus mark for EBITDA at this segment is pegged at $272 million, which indicates an improvement of 16.7% from the prior-year quarter.

Decrease in merchant fee revenues due to increased payments to retailers with an increase in both credit sales and volumes is likely to have dampened the segment’s performance in the third quarter. The consensus estimate for third-quarter average receivables stands at $15.6 billion.

Credit sales are likely to have witnessed an uptick in the to-be-reported quarter driven by an improved consumer confidence and mobility at both in-store sales and digital sales.

Disciplined risk management, higher consumer savings rates across the industry, and greater ability to pay and lower delinquency rates are likely to have resulted in a lower loss rate in the to-be-reported quarter.

LoyaltyOne is likely to have been affected in the third quarter due to lower revenues from short-term loyalty programs still reeling under the impact of COVID-19. The downside is likely to have been offset by the favorable impact of foreign currency exchange rates. The Zacks Consensus Estimate for the segment’s third-quarter revenues is pegged at $188 million, suggesting growth of 1.6% from the year-ago reported number.

Strong performance at the Card Services segments may get reflected in the company’s revenues in the to-be-reported quarter. The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.1 billion, which indicates an improvement of 3.7% from the prior-year quarter.

Expenses are likely to have escalated in the third quarter due to continued investments in digital, data and analytics, marketing and Bread for future growth. The company estimates higher expenses related to the core process, transition to Fiserv and higher brand loyalty redemption expenses.

The Zacks Consensus Estimate for earnings per share is pegged at $3.51, indicating an increase of 1.7% from the year-ago quarter’s reported figure.

What Our Quantitative Model Unveils

Our proven model does not conclusively predict 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. But that’s not the case here.

Earnings ESP: Alliance Data has an Earnings ESP of -1.71%. This is because the Most Accurate Estimate of $3.45 is pegged lower than the Zacks Consensus Estimate of $3.51. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Alliance Data Systems Corporation Price and EPS Surprise

Zacks Rank: Alliance Data carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Some 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:

Equifax, Inc. (EFX Quick QuoteEFX - Free Report) has an Earnings ESP of +1.12% and a Zacks Rank #3.

Envestnet, Inc (ENV Quick QuoteENV - Free Report) has an Earnings ESP of +0.58% and a Zacks Rank #3.

Fidelity National Information Services, Inc. (FIS Quick QuoteFIS - Free Report) has an Earnings ESP of +0.08% and a Zacks Rank of 3.