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Can Alliance Data (ADS) Retain Its Beat Streak in Q2 Earnings?

Alliance Data Systems Corporation ADS is scheduled to report second-quarter 2021 results on Jul 29, before the opening bell. The company beat estimates in each of the trailing four quarters.

Factors to Note

Reduced loan loss provision expense, courtesy of consistently robust card member payment behavior, is likely to have driven the Card Services segment’s to-be-reported quarter performance. The segment usually contributes the most to Alliance Data’s top-line growth. Reduced delinquency rate might have benefited the segment’s results in the second quarter.

The Zacks Consensus Estimate for second-quarter revenues at the Card Services segment stands at $880 million, which indicates an improvement of 6.3% from the prior-year quarter.  The consensus mark for EBITDA at this segment is pegged at $291 million, which is likely to more than double itself from the year-ago quarter’s reported number.

However, drop in card receivables is likely to have dampened the segment’s performance in the second quarter. The consensus estimate for second-quarter average receivables stands at $15.4 billion, which suggests a decline of 4.3% from the prior-year reported figure.

Credit sales are likely to have witnessed an uptick in the to-be-reported quarter driven by improved consumer spending at both in-store and online establishments. Gradual economy recovery on the back of increased vaccination drives and numerous government assistance measures may have driven the improvement.

Solid credit performance and lower delinquency rate are likely to have resulted in a lower loss rate in the to-be-reported quarter. Per the company’s last earnings call, net loss rate is estimated to be in mid to high 5% band for the second quarter.

As the loyalty program activity gradually tends to get better, performance of the company’s LoyaltyOne segment is likely to have received a boost. However, decline in travel redemptions coupled with lesser availability of short-term loyalty programs due to the COVID-19 pandemic might have hurt the segment’s performance in the second quarter. The Zacks Consensus Estimate for the segment’s second-quarter revenues is pegged at $177 million, suggesting growth of 17.2% from year-ago reported number.

Strong performance of both the segments may get reflected in the company’s revenues in the to-be-reported quarter. The Zacks Consensus Estimate for second-quarter revenues is pegged at $1.1 billion, which indicates an improvement of 7.7% from the prior-year quarter.

Expenses are likely to have escalated in the second quarter due to constant investments undertaken by the company aimed at technology advancements and bolstering Bread’s platform.

The Zacks Consensus Estimate for earnings per share is pegged at $3.83, which is likely to more than double itself from the prior-year quarter.

What Our Quantitative Model Unveils

Our proven model predicts 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.

Earnings ESP: Alliance Data has an Earnings ESP of +3.13%. This is because the Most Accurate Estimate of $3.95 is pegged higher than the Zacks Consensus Estimate of $3.83. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Alliance Data carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks to Consider

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

EVO Payments, Inc. EVOP has an Earnings ESP of +12.71% and a Zacks Rank #2.

Fidelity National Information Services, Inc. FIS has an Earnings ESP of +1.91% and a Zacks Rank #2.

Global Payments Inc. GPN has an Earnings ESP of +2.31% and a Zacks Rank of 2.


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