Alliance Data Systems (ADS) Tops Q3 EPS by 31c, Sales Light; Maintains EPS Outlook

October 19, 2017 7:31 AM EDT

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Alliance Data Systems (NYSE: ADS) reported Q3 EPS of $5.35, $0.31 better than the analyst estimate of $5.04. Revenue for the quarter came in at $1.91 billion versus the consensus estimate of $1.97 billion.

Ed Heffernan, president and chief executive officer of Alliance Data, commented, "The third quarter marked the beginning of our anticipated acceleration or \'slingshot\' in core earnings per share as we moved from growth of 2 percent in the first quarter to 4 percent in the second quarter to 13 percent this quarter. Excluding the change in our effective tax rate, our growth still accelerated to high single-digits for the third quarter. As with any quarter, there were "puts and takes," but the primary driver behind the acceleration was the much anticipated normalization in credit quality. Specifically, gross loss rates, which were up approximately 75 basis points in the first half of the year compared to the prior year period, improved to flat year-over-year in the third quarter, which was earlier than anticipated. We believe we are on track for reaching full stabilization (closing of the delinquency wedge) in the fourth quarter of 2017, suggesting that our 'slingshot' thesis for 2018 remains intact."

Heffernan continued, "Our third quarter results also reflect the early impact of hurricanes Harvey and Irma, which prompted us to provide a two-month leniency period for cardholders in FEMA-designated 'individual assistance' disaster areas. During this period, affected cardholders are not required to make payments, nor will interest or late fees be assessed. As a result, our gross yields on card receivables decreased over 100 basis points compared to the third quarter of 2016. As we continue to sort through the impacts of the hurricanes, we will do all that we can to lessen the burden on impacted cardholders. These actions may pressure gross yields, and the continued disruption from the hurricanes will likely reduce card spending in the fourth quarter. Despite this influence, and because of better than expected loss rates, we remain comfortable with maintaining our core EPS guidance of $18.10 for 2017 and $21.50 for 2018, representing a 19 percent growth rate."

For earnings history and earnings-related data on Alliance Data Systems (ADS) click here.

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