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Alliance Data (ADS) to Report Q1 Earnings: What's in Store?

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Alliance Data Systems Corporation (ADS - Free Report) is slated to report first-quarter 2018 results on Apr 25, before market open. The company delivered positive surprise in each of the last four reported quarters.

Let’s see how things are shaping up for this announcement.

Alliance Data’s first-quarter results should benefit from strong performance at Card Services and LoyaltyOne segments.

Card Service, accounting for more than half of the company’s revenues, should benefit from deal wins from both new and existing clients. However, the quarter’s results are likely to be affected by discontinued programs. The company reported average receivable for the first quarter of $16.9 billion, down 5% year over year.

Slow growth rate led delinquency rate to remain high at 5.2%, up 10 basis points year over year. The Zacks Consensus Estimate for EBITDA is pegged at $294 million, indicating a decline of 7.8% from the year-ago reported figure. Revenues are estimated to be $1.1 billion, implying a decline of 5.6% from the year-ago quarter reported figure.

Management estimates first-quarter revenues to be down mid-single digits while core EPS is expected to be down in high-single digits. The decline is largely attributable to divestiture of $2 billion-plus of receivables.

The Zacks Consensus Estimate for revenues is pegged at $1.8 billion, indicating a decline of 3.8% from the year-ago reported figure. The consensus mark for earnings per share is pegged at $4.05, suggesting a decline of 8.8% from the year-ago quarter reported figure.

LoyaltyOne should continue to benefit from BrandLoyalty, driven by growth across Europe, Asia, the United States as well as the company’s expansion efforts in Canada.

Promotional activities should help improve AIR MILES issued in the to-be-reported quarter.

Epsilon has been witnessing declining sales for some time due to decrease in agency and site-based display product offerings. Sales are expected to decline in the first quarter too. The Zacks Consensus Estimate for Epsilon revenues is pegged at $502 million, indicating a decline of 1.4% year over year.

However, expenses are likely to increase due to strategic initiatives including expansion efforts, thus restricting operating margin growth.

Share buybacks are likely to provide a boost to the bottom line.

What Our Quantitative Model States

Our proven model does not conclusively show that Alliance Data is likely to beat on earnings in to-be reported quarter. This is because the stock does not have the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP: Alliance Data has an Earnings ESP of -0.67%. This is because the Most Accurate Estimate is pegged at $4.02, lower than the Zacks Consensus Estimate of $4.05. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Alliance Data Systems Corporation Price and EPS Surprise

Zacks Rank: Alliance Data carries a Zacks Rank #3, which increases the predictive power of ESP.  However, we need to have a positive ESP to be confident about an earnings surprise.

The Sell-rated stocks (#4 or 5) should never be considered going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks from the finance sector that have the perfect mix of elements to surpass estimates this time around are as follows:

Evertec, Inc. (EVTC - Free Report) is set to report first-quarter earnings on May 1 and has an Earnings ESP of +3.73%. The company carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

FleetCor Technologies, Inc. (FLT - Free Report) has an Earnings ESP of +0.38% and a Zacks Rank of 2. The company is set to release first-quarter earnings on May 2.

Global Payments Inc. (GPN - Free Report) has an Earnings ESP of +0.33% and a Zacks Rank #3. The company is slated to announce first-quarter earnings on May 2.

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