Alliance Data Systems Corporation
) has been on an uptrend, reflecting investor enthusiasm so far.
Shares improved about 25% since beginning third quarter till
Factors Driving the Uptrend
Among others, recently the company announced its September
results of Private Label segment where its average receivables
surged 14% year over year to approximately $7.3 million and net
charge-offs were 4.3% of average receivables. Average receivables
also increased 17% year over year in the third quarter of 2013.
The Retail Service business inked a long term deal by agreeing to
provide its co-brand credit card and relative marketing services
for CREDO. This will generate a steady additional revenue account
for Alliance Data.
Alliance Data's expert marketing and strong analytical ability is
expected to enhance cardholder loyalty and repeat purchase. The
partnership is expected to create a solid market opportunity for
Alliance Data to leverage its marketing and co-brand offering
The company has been consistent in ensuring a steady revenue
generation by inking new long term deals, renewing contracts with
existing clients and through prudent global expansion initiatives
in recent times. For instance during the third quarter, Alliance
Data's Epsilon renewed its long term agreement with Marriot. The
Retail Service business signed long term deals with Geddes group,
PayPal, Coldwater Creek and
). The company's Canadian Loyalty Business also inked a new long
term agreement with Dunkin' Donuts and clothing company Old Navy.
With respect to its national rollout plan of the Dotz coalition
loyalty program in Brazil, Alliance Data expanded into two new
markets in Brazil's south - in the State of Santa Catarina and
the city of Curitiba in the State of Parana - in mid September.
We believe this will favorably impact the program's performance
going forward. Alliance Data holds 37% stake in Companhia
Brasileira De Servicos De Marketing (Dotz), the operator of
Brazil's Dotz loyalty program.
Prior to these launches, Dotz had 8.2 million customers enrolled
under the program. We expect a substantial increase in enrollment
to the Dotz program as it will now reach an additional population
of 8 million in Santa Catarina and the city of Curitiba.
In its second quarter earnings conference call, Alliance Data
announced that it intends to enter four additional Brazilian
markets in the second half of 2013. With the foray into these two
markets, Dotz is perfectly on track to achieve its aim of
exceeding $100 million in revenues in 2013, with 10 million
collectors by the end of the year.
Brazil, as the fifth-largest populated country with more than 190
million citizens, offers ample opportunities for Alliance Data to
weave success out of a popular coalition loyalty program, and
thus ramp up its Dotz program in the years to come.
With respect to earnings performance, Alliance Data delivered
positive surprise in three of last four quarters with an average
beat of neatly 3%. Solid performance across all the segments
drove the upside. We expect Alliance Data to deliver another
positive earnings surprise when it reports its third quarter
results today. This is because our proven model shows that the
company has the right combination of a positive
and Zacks Rank. Expected Surprise Prediction or ESP, which
represents the difference between the Most Accurate Estimate and
the Zacks Consensus Estimate is +0.79% and the stock carries a
Zacks Rank #2 (Buy).
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