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Alliance Data (ADS) Q4 Earnings & Revenues Miss Estimates

Sapna Bagaria
·3-min read

Alliance Data Systems Corporation’s ADS fourth-quarter 2019 operating earnings of $4.12 per share missed the Zacks Consensus Estimate by 0.9%. The bottom line declined nearly 29% year over year.

Earnings were weighed down by restructuring and strategic transaction costs.

Shares of the company lost 0.61% in the pre-market trading session owing to lower-than- expected results.

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

 

Behind the Headlines

Alliance Data reported total revenues of $1.46 billion, flat year over year. The top line missed the Zacks Consensus Estimate by 2.7%.

Operating expenses increased 20.5% year over year to $1.15 billion.

Adjusted EBITDA (net of funding costs) declined 39% year over year to $278 million.

Full Year Results

The company reported earnings per share of $16.77, down 14% year over year. Revenues of $5.58 billion declined 2% year over year.

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Segment Update

Card Services revenues were $1.13 billion, flat year over year. Adjusted EBITDA was $209.6 million, down 51% year over year.

LoyaltyOne revenues totaled $332 million, flat year over year. Adjusted EBITDA increased 19% to $80.3 million. AIR MILES reward miles issued was up 1% year over year.

The company incurred $33 million in restructuring and other charges.

Financial Update

As of Dec 31, 2019, cash and cash equivalents was $3.9 billion, up 1.5% from Dec 31, 2018-level.

At quarter end, debt level dropped 50.2% from 2018-end to $2.85 billion.

For the full year, the company generated cash from operations of $1.2 billion, down 24.4% year over year. Capital expenditure at Alliance Data declined 28.8% year over year to $142.3 million in the same period.

2020 Guidance

Alliance Data estimates core EPS of $20.5, indicating growth of 22% year over year. Revenues are expected to remain unchanged year over year at $5.6 billion.

Business Update

Alliance Data shifted its client base in Card Services toward faster growing companies and verticals by selling approximately $2.1 billion in non-strategic receivables. It divested  Epsilon and Precima units. The company extended the debt maturity ladder providing liquidity that can be used to re-invest in the business. A seasoned industry veteran, Ralph Andretta, was hired from Citigroup to lead the company.

Zacks Rank & Key Picks

Alliance Data currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same space are Envestnet, Inc. ENV) , Global Payments Inc. GPN and  Fidelity National Information Services, Inc. FIS. Each of the stocks carries Zacks Rank #2 (Buy).

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

Envestnet, Global Payments and Fidelity National Information surpassed earnings estimates in each of the four trailing quarters, with positive surprise of 3.51%, 2.42% and 2.92%, on average, respectively.

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Global Payments Inc. (GPN) : Free Stock Analysis Report
 
Alliance Data Systems Corporation (ADS) : Free Stock Analysis Report
 
Fidelity National Information Services, Inc. (FIS) : Free Stock Analysis Report
 
Envestnet, Inc (ENV) : Free Stock Analysis Report
 
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