Alliance Data's (ADS) November Average Receivables Improve

Alliance Data Systems Corporation’s ADS average receivables of $17.7 billion increased 16% in November. For the eleven-month period ended in the same month this year, average receivables climbed 16% year over year to $16.0 billion.

Net charge-offs came in at about $86 million for November while the same for the first eleven months of the current year was $884.1 million.

As a percentage of average receivables, net charge-offs for the month as well as the eleven-month period ended Nov 30, 2017, were 5.8% and 6.0%, respectively. The company had reported 5.7% and 5.1%, respectively for the same period last year.

Alliance Data stated that the net loss rates in the second half of 2017 will be lower than the number reported in the first half of the year. Based on the delinquency forecast, loss rates will tend to be flat to lower in 2018.

Delinquency rate deteriorated to 5.0% from 4.9% in the year-ago month.

Alliance Data has gained 5.0% year to date, underperforming the industry’s surge of 38.3%. However, we expect both the bottom and the top-line growth along with an improving EBITDA as well as a robust capital position to help the stock bounce back in the near term.

 

 

Card service segment of this Zacks Rank #3 (Hold) company has been performing well over the last several quarters. Alliance Data has been growing its private label card portfolio with a number of wins from both the new and existing clients. To that end, the company has projected mid-teens portfolio growth as well as improved revenues this year. This was supported by the new signings came about $2 billion vintage in 2017.

Stocks to Consider

Some better-ranked stocks from the same space are Total Systems Services, Inc. TSS, Visa Inc. V and The Western Union Company WU, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Total Systems provides payment processing, merchant and related payment services to financial and nonfinancial institutions in the United States, Europe, Canada, Mexico and internationally. The company came up with positive surprises in all the last four quarters with an average beat of 5.70%.

Visa operates as a payments technology company worldwide. The company delivered positive surprises in all the trailing four quarters with an average beat of 8.13%.  

The Western Union provides money movement and payment services worldwide. The company pulled off positive surprises in three of the last four quarters with an average beat of 9.08%.

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