On Oct 3, 2014, we issued an updated research report on Alliance Data Systems Corporation (ADS).
Alliance Data has delivered positive earnings surprises in three of the last four quarters with an average beat of 2.8%. Solid performances across all the segments helped it to outperform the Zacks Consensus Estimate and grow earnings year over year as well.
The company’s inorganic growth looks impressive with continued strategic acquisitions over the past couple of years. In its consistent efforts to acquire a leading position in the digital agency market, Alliance Data has taken over firms like Advecor, HMI, merged these with Epsilon- provider of integrated direct marketing solutions, combining database marketing technology and analytics with a wide array of direct marketing services. Earlier during the month the company also inked a deal to acquire Conversant, Inc. (CNVR). These strategic initiatives by the company will lead to enhanced growth in the digital marketing segment along with widening of omni-channel distribution capabilities.
Alliance Data remains focused on sharing more profits with its shareholders. In the first half of 2014, company spent $201.8 million to buy back 0.8 million shares. Moreover, in Jan 2014, the board approved a new $400 million buyback program, following which the company’s share repurchase authorization has reached nearly $3.6 billion since the first quarter of 2008.
The company has also been successfully strengthening its balance sheet. Its cash position improved about 135% in a span of three years. Cash from operations in the first six months of 2014 also witnessed a 10.7% year-over-year increase. Though the company’s long-term debt continues to rise, its debt capital ratio has showed improvement.
However, Alliance Data which competes with Fiserv, Inc. (FISV) and Western Union Co. (WU) have been witnessing a rise in expenses over the past few years. As a result, operating margin continues to contract.
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