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Alliance Data to Offer Credit Card Services to Penn National

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Alliance Data Systems Corporation’s (ADS - Free Report) card services business has inked a deal with Penn National Gaming (PENN) to provide credit card services to the latter. The agreement with Alliance Data will help strengthen Penn National's player database and ensure customer loyalty, which, in turn, will improve its top line.

Penn National Gaming is North America's largest regional gaming and entertainment company and operates 40 properties in the United States. Through its loyalty program, Penn National Gaming’s customers can earn points for gaming and other purchases at its locations. Leveraging Alliance Data’s card services, Penn National Gaming will provide opportunities to its customers to collect more points on hotel, dining and non-gambling entertainment purchases. Also, its customers can earn points through daily purchases using the card.

Alliance Data’s Card Service segment accounts for the majority of the company’s total revenues. Continuous agreements from both new and existing clients are favoring private label card portfolio. For Card Service segment, management estimates about mid-teens or 15% growth in average credit card receivable portfolio to $2.5 billion and adjusted EBITDA in 20% range.

Organic growth remained a key driver at Alliance Data, as evident from higher revenues. We believe the company will retain its revenue momentum in the coming quarters with ample opportunities from the current trends in consumer-based businesses. It will shift its marketing spend to data-driven strategies. The company estimates 2018 revenues to grow 10% year over year to $8.2 billion.

Shares of this Zacks Rank #3 (Hold) financial transaction services provider have lost 22.4% year to date against the industry’s rally of 15.2%. Nonetheless, we expect higher revenues, a solid card services performance, strategic initiatives as well as a robust capital position to aid the company’s turnaround in the near term.

Stocks to Consider

Some better-ranked financial transaction service providers are Cardtronics plc (CATM - Free Report) , Evertec, Inc. (EVTC - Free Report) and Green Dot Corporation (GDOT - Free Report) . Each of these stocks sports a Zacks Rank#1 (Strong Buy).

Cardtronics provides automated consumer financial services through its network of automated teller machines and multi-function financial services kiosks. The company delivered positive surprise of 47.62% in the last reported quarter. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

EVERTEC engages in transaction processing business serving financial institutions, merchants, corporations, and government agencies in Latin America and the Caribbean. The company delivered positive surprise of 9.76% in the last reported quarter. The stock carries a Zacks Rank #2 (Buy).

Green Dot operates as a pro-consumer bank holding company that provides personal banking for the masses. The company delivered positive surprise of 34.09% in the last reported quarter. The stock sports a Zacks Rank #1.

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