Monday, January 25, 2016

Will Forex Hurt Alliance Data System (ADS) Q4 Earnings?

Alliance Data Systems Corporation (ADS[1] - Analyst Report[2]) is scheduled to repo rt fourth-quarter and full-year 2015 results before the opening bell on Jan 28.
In the last quarter, this company delivered a 1.4% positive earnings surprise. The average beat for the trailing four quarters is 3%. Will Alliance Data deliver a positive earnings surprise this quarter as well?

Q4 Flashback

Alliance Data's earnings during the quarter will be affected by forex, which had stunted revenue growth by 5% in the last quarter and is likely to hurt the top line this time too.

The third quarter earnings release had projected a weaker-than-projected Canadian dollar entering the fourth quarter to offset the earnings.
 
Nevertheless, Alliance Data earnings should see accretion from strategic acquisitions made in the past. Its revenues should get a boost from the company's focus on providing private label credit card services to clients.

The bottom line will be helped by a lower share count attributable to continued share repu rchase by the company.

The company expects revenues and core EPS of $6.5 billion and $15.00, respectively, for 2015.

Earnings Whispers

Our proven model does not conclusively show that Alliance Data will likely beat the Zacks Consensus Estimate in the fourth quarter. That is because a stock needs to have both a positive Earnings ESP[3] and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.

Zacks ESP: Alliance Data's Most Accurate estimate is pegged at $3.85 per share, which is a penny ahead of the Zacks Consensus Estimate. The Earnings ESP is thus +0.26%.

Zacks Rank: Alliance Date has a Zacks Rank #4 (Sell). Note that also stocks with a favorable Zacks Rank have significantly higher chance of beating earnings, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.

Stocks to Consider

Here are some companies you may want to consider as these have the right combination of elements to post an earnings beat this quarter:  

The Chubb Corporation (CB - Analyst Report[4]) has an Earnings ESP of +1.32% and a Zacks Rank #1. The company is sc heduled to release fourth-quarter earnings results on Jan 26.

Aspen Insurance Holdings Ltd. (AHL[5] - Snapshot Report[6]), Earnings ESP of +19.3% and a Zacks Rank #2. The company is expected to report its fourth-quarter earnings results on Feb 4.

The Hartford Financial Services Group, Inc. (HIG[7] - Analys t Report[8]) has an Earnings ESP of +2.04% and a Zacks Rank #2. The company is scheduled to release fourth-quarter earnings results on Feb 4.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>[9]

References

  1. ^ ADS (www.zacks.com)
  2. ^ Analyst Report (www.zacks.com)
  3. ^ Earnings ESP (www.zacks.com)
  4. ^ Analyst Report (www.zacks.com)
  5. ^ AHL (www.zacks.com)
  6. ^ Snapshot Report (www.zacks.com)
  7. ^ HIG (www.zacks.com)
  8. ^ Analyst Report (www.zacks.com)
  9. ^ Click to get this free report >> (www.zacks.com)

Will Forex Hurt Alliance Data System (ADS) Q4 Earnings? Rating: 4.5 Posted by: Unknown

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