Alliance Data Systems Beats Expectations Soundly
By:
TraderMark Thursday, October 23, 2008 10:38 AM
Remember we own
Alliance Data Systems (ADS) for a non financial, non commodity (i.e. non correlated to the most controversial areas of the market), heavy buyback stock. (
Aug 29: Starting New Position: Alliance Data Systems) While these criteria have not protected the stock completely, it's done better than a lot of things of late on a relative basis as it's "only" down about 20% from recent peak. With the stock up nearly 6% in early trading,
off of a solid earnings report, I am going to take off most of this position, and reduce it from a 1.3% stake to
0.1% stake since gains last about 10 minutes nowadays. As per our thesis, as share count is reduced, the earnings per share will of course increase even if revenue or indeed net income is flattish.
Full report here.
- Marketing and transaction services company Alliance Data Systems Corp. said Wednesday its third-quarter earnings more than doubled on a spike in revenue from its loyalty services division. (that's misleading since there was a large 1x hit in 2007 of $40M)
- Net income in the third quarter increased 137 percent to $69.3 million, or 91 cents per share, from $29.2 million, or 76 cents per share, in the year-ago period. Adjusted for one-time costs, cash earnings came in at $85 million, or $1.22 per share. On average, analysts surveyed by Thomson Reuters expected third-quarter profit of $1.16 per share.
- Quarterly revenue edged up 4 percent to $511.2 million from $492 million in the previous year. The company attributed the increase in revenue to growth in its loyalty services, which includes programs such as air miles. Loyalty services revenue increased 25 percent to $187.7 million during the third quarter. The segment's revenue was boosted by the strong performance of its Canadian Air Miles Reward Program.
- Revenue from the company's Epsilon marketing services rose 6 percent during the quarter to $130.8 million, while the revenue of its private label credit unit shrunk 12 percent to $182.4 percent due mainly to the loss of the Lane Bryant portfolio.
- The company is also raising its full-year cash earnings to $4.40 per share from $4.35 per share.
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