Alliance Data Systems Earnings Preview

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After beating estimates last quarter by $0.02, Alliance Data Systems (NYS: ADS) has set the standard for itself. The company will unveil its latest earnings Thursday. Alliance Data Systems is a provider of data-driven and transaction-based marketing and customer loyalty solutions.

What analysts say:

  • Buy, sell, or hold?: The majority of analysts back Alliance Data Systems as a buy. But with 58.8% of analysts rating it a buy, Alliance Data Systems is still below the mean analyst rating of its nearest 10 competitors, which average 71.3% buys. Analysts don't like Alliance Data Systems as much as competitor Fidelity National Information Services overall. Eight out of 13 analysts rate Fidelity National Information Services a buy compared with 10 of 17 for Alliance Data Systems. While analysts still rate the stock a moderate buy, they are a little more optimistic about it compared with three months ago.
  • Revenue Forecasts: On average, analysts predict $797.4 million in revenue this quarter. That would represent a rise of 13.5% from the year-ago quarter.
  • Wall Street Earnings Expectations: The average analyst estimate is earnings of $1.77 per share. Estimates range from $1.73 to $1.81.

What our community says:
CAPS All-Stars are solidly behind the stock with 90% awarding it an "outperform" rating. The community at large backs the All-Stars with 84.6% giving it a rating of "outperform." Fools are bullish on Alliance Data Systems, though the message boards have been quiet lately with only 80 posts in the past 30 days. Alliance Data Systems' bearish CAPS rating of two out of five stars falls short of the Fool community sentiment.

Management:
Alliance Data Systems' profit has risen year over year by an average of 40.4% over the past five quarters. The company's gross margin shrank by 4.8 percentage points in the last quarter. Revenue rose 10.6% while cost of sales rose 20.6% to $431.3 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter

Q2

Q1

Q4

Q3

Gross Margin

41.8%

45.4%

41.3%

45.3%

Operating Margin

25.9%

28.6%

18.6%

24.2%

Net Margin

9.3%

11.7%

6.2%

7.6%

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At the time this article was published

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