Alliance Data Systems Corporation’s ADS operating earnings of $5.24 per share in the fourth quarter of 2017 surpassed the Zacks Consensus Estimate of $5.00. The bottom line improved 12.2% year over year.
Card Service and LoyaltyOne segment posted solid results. Expenses declined owing to lower operating costs fueling operating income growth.
Alliance Data Systems Corporation Price, Consensus and EPS Surprise
Alliance Data Systems Corporation Price, Consensus and EPS Surprise | Alliance Data Systems Corporation Quote
Behind the Headlines
Alliance Data’s revenues came in at $2.11 billion, up 15% year over year. The top line missed the Zacks Consensus Estimate of $2.15 billion.
Operating expenses slipped 0.3% year over year to $1.6 billion, primarily on the back of lower cost of operations. Operating income more than doubled year over year to $462.7 million.
Adjusted EBITDA inched up 1% year over year to $514 million.
Full-Year Highlights
Operating earnings of $18.33 per share for 2017 topped the Zacks Consensus Estimate of $18.08. The bottom line rose 8% over 2016.
Revenues of $7.22 billion missed the Zacks Consensus Estimate of $7.76 billion. The top line gained 8% year over year.
Adjusted EBITDA climbed 3% year over year to $1.94 billion.
AIR MILES reached profitability marks.
Segment Update
LoyaltyOne: Revenues totaled $385 million, surging 56% year over year. Adjusted EBITDA improved 9% to $80 million. AIR MILES’ reward miles issued decreased 5% while AIR MILES’ reward miles redeemed slumped 56%.
Epsilon: Revenues were $640 million in the quarter, up 7% year over year. Adjusted EBITDA decreased 2% year over year to $159 million, attributable to increase in incentive compensation.
Card Services: Revenues came in at $1.09 billion, up 10% year over year. Adjusted EBITDA was $311 million, up 4% year over year.
Financial Update
As of Dec 31, 2017, cash and cash equivalents were $4.2 billion compared with $1.8 billion as of Dec 31, 2016.
At the end of 2017, debt rose 8.5% from 2016-end to $6.1 billion.
Capital expenditure at Alliance Data increased 8.7% year over year to $176.6 million in 2017.
Dividend Update
The board of directors approved a 10% hike in quarterly dividend to 57 cents per share.
2018 Guidance
The company expects core EPS for the current year between $22.50 and $23.00, up 16-19% over 2017.
Revenues lowered to $8.35 billion from $8.7 billion guided earlier. The top line represents an 8% improvement over 2017.
Positive impact of tax reform, net of initiatives, is estimated between $1.00 and $1.50 per share.
Zacks Rank
Alliance Data carries a Zacks Rank #3 (Hold).
Performance of a Financial Transaction Service Provider
Total System Services, Inc.’s TSS bottom line has outpaced the Zacks Consensus Estimate in the fourth quarter.
Stocks to Consider
Two better-ranked financial transaction service providers are Visa, Inc. V and MasterCard Inc. MA , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
While MasterCard is set to report fourth-quarter 2017 earnings on Feb 1, Visa will report first quarter of fiscal 2018 earnings on Feb 1.
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