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Can Alliance Data (ADS) Spring a Surprise in Q2 Earnings?

Alliance Data Systems Corporation ADS is set to report second-quarter 2017 results on Jul 20, before the market opens. Last quarter, the company’s earnings were in line with the expectation. Let’s see how things are shaping up for this earnings season.

Factors to Influence Q2 Results

Alliance Data is estimated to have generated improved revenues on the back of a strong performance across each segment. While higher receivables are expected to have favored better results at Card Services segment, higher numbers to contracts supported a decent performance at Epsilon segment.

Average receivables increased 16% in the first half of 2017. The company continues to witness growth in auto, CRM and data supporting Epsilon segment.

BrandLoyalty performance has likely been driven by growth across the U.S., Europe, Asia as well as expansion efforts in Canada.

The bottom line got additional support from share repurchases.

However, delinquency rates as on Jun 30, 2017 deteriorated 46 basis points from last year. Expenses are anticipated to have escalated, weighing on margin expansion.

The company’s share price has been fluctuating over the last few days and is currently trading at 2.07. We wait to see how the stock performs, post the earnings release.

Earnings Whispers

Our proven model does not conclusively show that Alliance Data is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Alliance Data has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $3.47. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Alliance Data carries a Zacks Rank #3, which increases the predictive power of ESP. However, an Earnings ESP of 0.00% makes surprise prediction difficult.

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some better-ranked companies from the finance sector, having the right combination of elements to come up with an earnings beat this quarter, are as follows.

Everest Re Limited RE has an Earnings ESP of +2.26% and a Zacks Rank #2. The company is set to report its second-quarter earnings on Jul 24. You can see _1link">the complete list of today’s Zacks #1 Rank stocks here.

American Express Company AXP, with an Earnings ESP of +1.37% and a Zacks Rank #3, is slated to report its second-quarter earnings on Jul 19.

Chubb Limited CB has an Earnings ESP of +0.80% and a Zacks Rank #3. The company is set to report its second-quarter earnings on Jul 25.

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