Alliance Data Systems (ADS) soared to the top of the S&P 500 today after beating the Street’s earnings and revenue expectations.
Alliance Data Systems gained 8.3% to $260.62, while the S&P 500 rose 0.8% to 2,355.84.
Evercore ISI’s David Togut and team argue that Alliance Data Systems is “checking the right boxes.” They explain:
ADS’ 1Q/17 earnings reinforced our conviction that net charge offs will stabilize at the end of this year, driving accelerating earnings growth in 2018. Card Services surpassed our revenue and EBITDA forecasts fueled by an 80 basis point increase in gross card yield thanks to rising interest rates. Epsilon’s revenue growth accelerated to 7% from a 1% decline in 4Q/16 driven by double digit growth in Automotive, Agency and digital CRM plus an easy comparison. LoyaltyOne revenue and EBITDA fell below our estimates given soft results from AIR MILES, which is adjusting its value proposition after the Ontario Legislature last December eliminated the expiration date on AIR MILES. Overall, ADS remains on track to generate double-digit adjusted EBITDA and EPS gains in 2017, and in 2018 to accelerate EPS growth to the mid-teens given slowing headwinds from delinquencies plus operating leverage from stabilizing net charge-off rates.
Alliance Data Systems’ market capitalization rose to $14.6 billion today from $13.5 billion yesterday.