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Alliance Data (ADS) to Report Q4 Earnings: A Beat in Store?

We expect Alliance Data Systems CorporationADS to beat earnings expectations when it reports its fourth-quarter and full-year 2016 results on Jan 26.

Why a Likely Positive Surprise?

Our proven model shows that Alliance Data has the right combination of two key ingredients to beat earnings.

Positive Zacks ESP : Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +0.23%. This is a major indicator of a likely positive earnings surprise for the company.

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks Rank #3 (Hold) : Alliance Data carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 have a significantly higher chance of beating earnings.

The combination of Alliance Data's Zacks Rank #3 and ESP of +0.23% makes us confident of an earnings beat on Jan 26. The Zacks Consensus Estimate of $4.41 for the quarter reflects a year-over-year increase of about 14%.

Notably, the company has reported a positive earnings surprise in three of the trailing four quarters.

Alliance Data Systems Corporation Price and EPS Surprise

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

Factors to Influence Q4 Results

We believe that the quarterly results should get some support from the company's solid receivables growth in its Card Services segment. Alliance Data reported a 22% growth on a year-over-year basis in average receivables for each of the months of October, November and December.

Performance at Epsilon should reflect the effect of cost restructuring in India. Focus remains on whether Epsilon's agency offering has managed to generate a number of new wins as witnessed in the third quarter.

Further, the company's digital and technology platforms business is anticipated to have experienced revenue growth driven by its automotive platform, Conversant Customer Relationship Management (CRM) and continuous offerings in the digital space.

Moreover, Alliance Data is likely to report revenue growth at BrandLoyalty in the quarter, given its progress in the U.S. However, AIR MILES revenue is likely to exhibit a decline in the to-be-reported quarter.

Alliance Data had guided a $7.2 billion in total revenue and core EPS of $16.90 for 2016. This reflects year-over-year increases of 11% and 12%, respectively.

Stocks that Warrant a Look

Here are some stocks worth considering, as they have the right combination of elements to post an earnings beat this quarter.

Nasdaq, Inc. NDAQ is scheduled to release results on Jan 31. It has an Earnings ESP of +1.06% and carries a Zacks Rank #3.

CME Group Inc. CME is slated to release results on Feb 2. It has an Earnings ESP of +1.85% and carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

CBOE Holdings, Inc. CBOE has an Earnings ESP of +3.45% and sports a Zacks Rank #1. The company is slated to release results on Feb 6.

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CME Group Inc. (CME): Free Stock Analysis Report

Nasdaq, Inc. (NDAQ): Free Stock Analysis Report

CBOE Holdings, Inc. (CBOE): Free Stock Analysis Report

Alliance Data Systems Corporation (ADS): Free Stock Analysis Report

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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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