Alliance Data (ADS) to Report Q4 Earnings: What's in the Cards?

Alliance Data Systems Corporation ADS is scheduled to report fourth-quarter 2021 results on Jan 27, before the opening bell. The company delivered an earnings surprise in each of the last four quarters, the average being 52.9%.

Factors to Note

Decrease in the provision for loan loss due to improved credit performance, decrease in interest expense, net due to lower average balances and higher revenues are likely to have driven the Card Services segment’s performance in the to-be-reported quarter.

Strong performance at the Card Services segments due to higher finance charges, owing to the increase in finance charge yield resulting from higher late fees may get reflected in Alliance Data's revenues in the to-be-reported quarter. The Zacks Consensus Estimate for the segment’s fourth-quarter revenues is pegged at $919 million, suggesting growth of 4.6% from the year-ago reported number.

The consensus estimate for fourth-quarter average receivables stands at $16.1 billion.

Credit performance is likely to have witnessed an uptick in the to-be-reported quarter driven by prudent risk management strategy changes, improved underwriting actions, and direct consumer stimulus payments that result in greater customer liquidity and ability to pay.

Disciplined risk management, higher consumer saving rates across the industry and a greater ability to pay are likely to have resulted in a lower loss rate in the to-be-reported quarter.

The LoyaltyOne segment was spun off as Loyalty Ventures, Inc. which is expected to enhance the ability to deliver long-term sustainable growth. This spin-off is likely to enable both Alliance Data and Loyalty Ventures to focus on the unique growth opportunities and is expected to reinforce Alliance Data's enterprise-level capital metrics and other key metrics. The financial results of this segment will be reflected as discontinued operations.

Strong performance at the Card Services segments may get reflected in the company’s revenues in the to-be-reported quarter. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $975 million, which indicates a decline of 12.2% from the prior-year quarter.

Total expenses are likely to have decreased due to improved funding costs and efficiencies in operations. The decrease is expected to be partially offset by higher investment in marketing, technology infrastructure, digital and Bread. Alliance Data expects seasonally higher expenses in the fourth quarter.

The Zacks Consensus Estimate for earnings per share is pegged at 49 cents, indicating a decrease of 84.7% from the year-ago quarter’s reported figure.

What Our Quantitative Model Unveils

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 -0.73%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Alliance Data Systems Corporation Price and EPS Surprise

Alliance Data Systems Corporation Price and EPS Surprise

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

Zacks Rank: Alliance Data carries a Zacks Rank of 5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

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

Concentrix CNXC has an Earnings ESP of +7.78% and a Zacks Rank #3. The Zacks Consensus Estimate for Concentrix’s 2022 earnings has moved 3.7% north in the past seven days. CNXC’s expected long-term earnings growth rate is pegged at 15.5%.

The Zacks Consensus Estimate for Concentrix’s 2022 earnings implies a year-over-year increase of 11.8%. CNXC’s earnings surpassed estimates in each of the last four quarters, the average beat being 9.9%.

IBEX Limited IBEX has an Earnings ESP of +23.64% and a Zacks Rank #3. The Zacks Consensus Estimate for IBEX’s 2022 earnings has moved 3.8% north in the past 30 days.

The Zacks Consensus Estimate for IBEX Limited’s 2023 earnings implies a year-over-year increase of 20.4%. IBEX’s earnings surpassed estimates in three of the last four quarters and missed in one, the average beat being 28.4%.

WNS WNS has an Earnings ESP of +1.36% and a Zacks Rank of 2. The Zacks Consensus Estimate for WNS’s 2022 earnings has moved 0.6% north in the past seven days.

The Zacks Consensus Estimate for WNS’s 2022 earnings implies a year-over-year increase of 22.7%. WNS’s earnings surpassed estimates in each of the last four quarters, the average beat being 8.8%.

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

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