On Mar 28, 2013, shares of
Alliance Data Systems Corporation
) hit a 52-week high of $162.07. The company is continuosuly
signing long-term agreements, which along with the renewal of the
existing ones will further enhance its performance.
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Previously, Alliance Data had reported fourth-quarter results
with an earnings surprise of 2.4%. This financial transaction
service provider witnessed positive earnings surprises in all
four quarters of 2012, with an average beat of 4.1%.
Over the recent past, the Retail Service Business of Alliance
Data inked a couple of new deals. In February end, this business
segment entered into a long-term renewal agreement with Gander
Mountain to continue with the co-brand credit card program
service. More recently, it signed an agreement with
Caesars Entertainment Corporation
) to launch a new Total Rewards credit card.
Further, its Epsilon division inked a long-term renewal agreement
with Carlson Rezidor Hotel Group to continue providing email
marketing services for the latter in the Americas and
The company's Canadian loyalty business signed a new multi-year
agreement with Staples Canada Inc.
On Jan 31, Alliance Data reported fourth-quarter 2012 operating
income of $1.84 per share, surpassing the Zacks Consensus
Estimate of $1.68 and improving 8% year over year.
Better-than-expected results based on strong performances across
all segments augmented the results.
Valuation for Alliance Data looks attractive. Though the shares
are trading at a premium to the peer group average, return on
equity is significantly higher than the peer group average both
on a price-to-book basis and on a forward price-to-earnings
basis. The 1-year return from the stock is 28.5%, much above
S&P's return of 11.4%.
Continued focus on strategic acquisitions to grow inorganically,
the national rollout of its dotz coalition loyalty program in
Brazil, and inking long-term deals are expected to drive sold
numbers ahead. The company also has a new $400 million share
buyback program under its authorization. The overall long-term
sales are likely to be 14.8% and 14.3%, respectively.
Alliance Data presently carries a Zacks Rank # 2 (Buy). Financial
transaction service providers like
Total System Services, Inc
) among others, carry a favorable Zacks Rank # 2 and appear