Alliance Data Systems Corporation ADS is set to report first-quarter 2015 results on Apr 16 before the market opens. Last quarter, the company posted a 3.55% positive earnings surprise. Let’s see how things are shaping up for this announcement.
Factors Influencing This Past Quarter
Alliance Data’s strategic acquisition of Conversant, Inc. will continue to drive earnings in the to-be-reported quarter.
AIR MILES issued is expected to increase with the help of the Sobeys addition. Sobeys is a national sponsor after joining programs in Ontario and Western Canada. The company also signed long-term deals with Shell Canada Products and Metro Ontario Inc. Moreover, BrandLoyalty’s complementary product offering to existing AIR MILES clients will also open avenues for growth.
Alliance Data’s focus on inking deals to provide private label credit card services to clients will give a boost to its top line.
Management expects Alliance Data to generate revenues of about $1.54 billion in the first quarter, translating into a year-over-year increase of 25%. Core earnings per share are expected at $3.40, up 22% year over year.
However, rising expenses are a nagging concern as it might weigh on margin expansion.
Earnings Whispers?
Our proven model does not conclusively show that Alliance Data is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Alliance Data has -0.93% Earnings ESP. This is because the Most Accurate estimate stands at $3.20 while the Zacks Consensus Estimate is pegged higher at $3.23.
Zacks Rank: Alliance Data carries a Zacks Rank #3 (Hold). Though this increases the predictive power, the company’s negative ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as these have the right combination of elements to post an earnings beat this quarter:
Huron Consulting Group Inc. HURN, Earnings ESP of +4.76% and a Zacks Rank #2 (Buy).
MasterCard Incorporated MA, Earnings ESP of +1.25% and a Zacks Rank #3.
Calpian, Inc. CLPI, Earnings ESP of +25% and a Zacks Rank #3.
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