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Alliance Data (ADS) Q2 Earnings Top, Tweaks Revenue View

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Alliance Data Systems Corporation 's ADS operating earnings of $5.01 per share in the second quarter of 2018 surpassed the Zacks Consensus Estimate of $4.59. Also, the bottom line improved 31% year over year on the strength of Card Services and LoyaltyOne segment results.

Alliance Data Systems Corporation Price, Consensus and EPS Surprise

Alliance Data Systems Corporation Price, Consensus and EPS Surprise | Alliance Data Systems Corporation Quote

Behind the Headlines

Alliance Data generated total revenues of $1.9 billion, having increased 5% year over year. Pro forma revenues, which adjust for the change to net revenue presentation for AIR MILES effective Jan 1, 2018, improved 8% year over year to $1.97 billion. The top line also outpaced the Zacks Consensus Estimate of $1.91 billion.

Operating expenses inched up 0.9% year over year to $1.5 billion, primarily on the back of higher provision for loan loss. Operating income increased 19.6% year over year to $420.3 million.

Adjusted EBITDA (net of funding costs) rose 9% year over year to $471 million.

Segment Update

LoyaltyOne : Revenues totaled $315 million, having improved 12% year over year. Adjusted EBITDA grew 22% to $69.5 million. AIR MILES' reward miles issued increased 2% while AIR MILES' reward miles redeemed slipped 1%.

Epsilon : Revenues were $514 million in the quarter under review, down 5% year over year, attributable to a decrease in lower margin pass-through agency business. Adjusted EBITDA nudged up 0.1% year over year to $106.9 million, driven by a favorable shift in revenue mix.

Card Services : Revenues came in at $1.2 billion, up 14% year over year. Adjusted EBITDA was $335.7 million, up 10% year over year.

Financial Update

As of Jun 30, 2018, cash and cash equivalents were $3.4 billion, down 17.7% from Dec 31, 2017-level of $4.2 billion.

At the end of the second quarter, debt level was lowered 4.8% to $5.8 billion from 2017 end.

Cash from operations improved 29.3% to $1.3 billion while capital expenditure at Alliance Data decreased 15.7% year over year to $98.5 million in the reported quarter.

2018 Guidance

The company continues to expect core EPS between $22.50 and $23.00, up 16% and 19% over the tally in 2017.

Revenues are expected to be $8.2 billion, up 10% over last year's figure. The company earlier projected revenues to be about $8.35 billion.

Zacks Rank

Alliance Data carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some other players from the same space, poised to beat on earnings per the proven Zacks model are:

Mastercard Incorporated. MA is set to report second-quarter earnings on Jul 26. The company has an Earnings ESP of +0.58% and a Zacks Rank of 3. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

WEX Inc. WEX is set to report second-quarter earnings on Jul 26. This #2 (Buy) Ranked stock has an Earnings ESP of +0.67%.

Fidelity National Information Services, Inc. FIS has an Earnings ESP of +1.04%. This #3 Ranked company is set to report second-quarter earnings on Jul 31.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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