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Alliance Data (ADS) Misses on Q1 Earnings, Suspends '20 View

Zacks Equity Research

Alliance Data Systems Corporation’s ADS first-quarter 2020 operating earnings of 75 cents per share missed the Zacks Consensus Estimate by 84.8%. The bottom line also declined 80% year over year.

The company’s results were dented by increased provision expense.

Behind the Headlines

Alliance Data reported total revenues of $1.4 billion, up 4% year over year. Notably, the top line outpaced the Zacks Consensus Estimate by 4.2%. The upside can be attributed to strong performance of the company’s Card Services segment, which contributed 85.7% to the first quarter top line.

Operating expenses increased 24.6% year over year to $1.2 billion, primarily due to rise in provision expense.

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Adjusted EBITDA (net of funding costs) declined 74% year over year to $83 million.

Alliance Data Systems Corporation Price, Consensus and EPS Surprise

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

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

Segment Update

Card Services revenues were $1.2 billion, up 5% year over year. This segment benefited from an improved gross yield. However, adjusted EBITDA was $47 million, down 84% year over year.

LoyaltyOne revenues totaled $198.1 million, down 3% year over year. The downside can be attributable to the company’s decision to divest Precima in January of this year. Adjusted EBITDA increased 5% to $57.8 million. AIR MILES reward miles issued was up 5% year over year, primarily due to rise in sponsor promotions in the beginning of the first quarter.

Dividend Update

Concurrent with the first-quarter 2020 earnings release, the company’s board of directors approved a quarterly cash dividend of 21 cents per share, which reflects a reduction of 66.7% from the prior dividend payout of 63 cents. The dividend will be paid on Jun 18, 2020 to shareholders of record as on May 14.

Financial Update

As of Mar 31, 2020, cash and cash equivalents was $4.5 billion, up 15% from Dec 31, 2019-level.

At quarter end, debt level increased 7.9% from 2019-end to $3.1 billion.

2020 Guidance Withdrawn

The COVID-19 pandemic has sparked recessionary fears globally. It has also put the entire U.S. economy in a sluggish phase. Consequently, Alliance Data withdrew its prior guidance of 2020.

Zacks Rank

Alliance Data currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Some stocks worth considering from the business services sector with a perfect combination of elements to surpass estimates in the upcoming quarterly releases are as follows:

Huron Consulting Group Inc. HURN presently has an Earnings ESP of +3.20% and a Zacks Rank of 2. The company is set to report first-quarter 2020 results on Apr 30.

Spotify Technology S.A. SPOT currently has an Earnings ESP of +26.53% and a Zacks Rank #3. The company is slated to announce first-quarter 2020 results on Apr 29.

ICF International, Inc. ICFI has an Earnings ESP of +3.08% and a Zacks Rank of 3, at present. The company is slated to announce first-quarter 2020 earnings on May 5.

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Alliance Data Systems Corporation (ADS) : Free Stock Analysis Report
 
Huron Consulting Group Inc. (HURN) : Free Stock Analysis Report
 
ICF International, Inc. (ICFI) : Free Stock Analysis Report
 
Spotify Technology SA (SPOT) : Free Stock Analysis Report
 
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