Alliance Data Q3 Profit Tops View, But Revenues Miss; Boosts 2014 Profit Outlook

(RTTNews) - Marketing and customer loyalty solutions provider Alliance Data Systems Corp. (ADS) reported Thursday a profit for the third quarter that increased from last year, boosted by revenue growth across all its operational segments, particularly LoyaltyOne.

Core earnings per share topped analysts' expectations, while quarterly revenues missed their estimates by a whisker. The company also initiated earnings and revenues forecast for the full-year 2015, above Street view, and raised full-year 2014 earnings guidance, while maintaining annual revenues outlook.

"Early in 2014, many expressed concern that our guidance for the year was too "back-end" loaded - that maybe it was overly optimistic. The acceleration in both earnings and margin expansion during the third quarter should allay those concerns as the heavy personnel-related investments made earlier in the year are now producing results," President and CEO Ed Heffernan said in a statement.

The Dallas, Texas-based company reported net income of $164.2 million or $2.74 per share for the third quarter, higher than $132.9 million or $2.01 per share in the prior-year quarter.

Excluding special items, core earnings for the quarter was $207.7 million or $3.47 per share, compared to $176.1 million or $2.67 per share in the year-ago quarter.

On average, 23 analysts polled by Thomson Reuters expected the company to report earnings $3.31 per share for the quarter. Analysts' estimate typically excludes special items.

Adjusted EBITDA for the quarter grew 15 percent to $376.0 million from $328.5 million a year ago.

Revenue for the quarter increased 20 percent to $1.32 billion from $1.10 billion in the same quarter last year, but missed twenty-one Wall Street analysts' consensus estimate of $1.33 billion by a whisker. Organic revenue growth was 10 percent.

"Driving the big jump in earnings for the third quarter was the Private Label segment. Early in 2014, we beefed up the infrastructure at Private Label to reduce executional risk associated with the on-boarding of a record number of new programs in 2014," Heffernan added.

Segment-wise, revenues from LoyaltyOne surged 52 percent to $324.5 million, and revenue from Epsilon rose 8 percent to $377.6 million from a year ago. Private Label Services and Credit revenue grew 17 percent to $622.3 million from the prior-year quarter.

Looking ahead to fiscal 2014, the company raised core earnings guidance to $12.40 per share from the prior forecast of $12.35 per share. Meanwhile, the company continues to project revenue of $5.3 billion, with double-digit organic growth. Street is currently looking for full-year 2014 earnings of $12.44 per share, on annual revenues of $5.31 billion.

For fiscal 2015 and including the expected full-year benefit of the pending Conversant acquisition, the company now projects core earnings per share in the range of $14.80 to $15.00 per share on revenues of at least $6.625 billion, which assumes about 10 percent organic growth. Analysts currently estimate full-year 2015 earnings of $14.54 per share on revenues of $6.02 billion.

Alliance Data agreed on September 11 to acquire digital marketing company Conversant, Inc. (CNVR) in a cash and stock deal valued at about $2.3 billion. The parties currently expect to close the transaction by year end.

In Thursday's regular trading session, ADS is currently trading at $237.71, down $0.59 or 0.25% on a volume of 5,875 shares.