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Why Alliance Data Systems Shares Plunged Today

By Evan Niu, CFA – Updated Apr 21, 2019 at 12:35AM

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Alliance Data reported fourth-quarter revenue and 2019 guidance that missed expectations.

What happened

Shares of Alliance Data Systems (BFH 0.72%) have plunged today, down by 12% as of 11:30 a.m. EST, after the company reported fourth-quarter earnings results. While the marketing and customer loyalty specialist beat on the bottom line, it missed on the top line.

So what

Revenue in the fourth quarter fell 2% to $2.06 billion, which was below the $2.12 billion in sales that analysts were expecting. That translated into non-GAAP earnings per share of $7.04, ahead of the consensus estimate of $7.01 per share in adjusted profits. Adjusted EBITDA grew 20% to $715 million.

Businessman pointing to "Customer Loyalty"

Image source: Getty Images.

Pro forma revenue was $2.12 billion, below the company's expectations due to "strategic repositioning at Card Services and softness at Epsilon," CEO Ed Heffernan said in a statement. Alliance Data said last year that it was shifting its card services segment toward more attractive industries and customers, and looking to sell off the Epsilon business. The company has received preliminary bids for Epsilon, Heffernan said.

Check out the latest Alliance Dataearnings call transcript.

Now what

Alliance Data's guidance for 2019 also came in relatively light. The company expects to generate $8.1 billion in revenue this year, with adjusted earnings per share of $22. The Street is currently modeling for $8.24 billion in sales and adjusted earnings per share of $24.67. Alliance Data said the first half of 2019 will see "muted" growth in adjusted earnings per share as it completes the divestiture of held-for-sale assets, a process that it started in the second half of 2018.

Revenue in the first quarter is expected to decline by "mid single-digits," with adjusted earnings per share falling "high single-digits."

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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