Alliance Data (ADS) to Report Q2 Earnings: What's in Store?

Alliance Data Systems Corporation ADS is slated to report second-quarter 2020 results on Jul 23, before market open. The company delivered a negative surprise of 84.76% in first-quarter 2020.

Factors to Note

The Card Services segment’s, which accounts for a significant portion of the company’s top line, second-quarter performance might reflect reduction in credit sales. Credit sales are likely to have declined owing to fall in retail brick-and-mortar sales on closure of retail channels amid the COVID-19 pandemic. Loss and delinquency rates are likely to have increased in the to-be-reported quarter. Evidently, the Zacks Consensus Estimate for second-quarter average receivables is pegged at $15.4 billion, indicating a decline of 8.5% from the year-ago reported figure.

The Zacks Consensus Estimate for EBITDA at the Card Services segment is pegged at $174 million, indicating a decline of 39.4% from the prior-year figure. The consensus estimate for revenues at this segment stands at $996 million, suggesting a decline of 9.2% from the year-ago reported figure.

Also, fall in travel-related redemptions due to the pandemic might have impacted the company’s LoyaltyOne segment in the to-be-reported quarter. The divestment of Precima (which contributed a significant portion to this segment’s top-line growth) in January this year and costs associated with the divestiture may have impacted the segment’s second-quarter performance. The Zacks Consensus Estimate for second-quarter revenues at this segment is pegged at $202 million, indicating a decline of 19.8% from prior-year quarter. Also, the consensus estimate for EBITDA stands at $36.2 million, indicating a fall of 29% from the year-ago reported figure.

Not so impressive performance at both the segments is likely to get reflected in the second-quarter results. The Zacks Consensus Estimate for second-quarter revenues stands at $1.3 billion, suggesting a decline of 7.3% from the year-earlier quarter.

Moreover, the company’s expenses are likely to have risen in the second quarter primarily due to rise in provision expense. Nevertheless, several cost-cutting initiatives have led to creation of cost savings, which might have partially offset the increase in expenses in the second quarter.

The Zacks Consensus Estimate for earnings per share is pegged at $1.87, indicating a decline of 51.2% from the year-ago quarter.

Alliance Data Systems Corporation Price and EPS Surprise

Alliance Data Systems Corporation price-eps-surprise | Alliance Data Systems Corporation Quote

What Our Quantitative Model Predicts

Our proven model does not conclusively predict an earnings beat for Alliance Data this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Alliance Data has an Earnings ESP of -37.90%. This is because the Most Accurate Estimate of $1.16 is pegged lower than the Zacks Consensus Estimate of $1.87. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Alliance Data carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Some stocks worth considering from the financial transaction services industry with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:

Diebold Nixdorf, Incorporated DBD has an Earnings ESP of +14.29% and a Zacks Rank #2.

Global Payments Inc. GPN has an Earnings ESP of +5.86% and a Zacks Rank #3.

Mastercard Incorporated MA has an Earnings ESP of +2.52% and a Zacks Rank of 3.

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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.