How Will This Analyst Action Affect Alliance Data Systems (ADS) Stock Today?

NEW YORK (TheStreet) -- Alliance Data Systems Corp.  (ADS) stock is down -0.53% to $273.55 in early market trading after it was downgraded to "neutral" from "outperform" at Robert W. Baird & Co., citing the company's easing tailwinds from interest rates and loan loss provisions. 

The firm increased its price target to $287 from $270.

That was despite the marketing solutions company on Thursday reporting its second quarter earnings results of $2.90 per share, 17 cents better than analysts' estimate of $2.73, and up 20% from $2.41 from the same quarter a year ago.

 
Second quarter revenue increased 23% to $1.27 billion versus $1.03 billion from the same quarter in 2013.

Separately, TheStreet Ratings team rates ALLIANCE DATA SYSTEMS CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate ALLIANCE DATA SYSTEMS CORP (ADS) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share, increase in net income, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 16.1%. Since the same quarter one year prior, revenues rose by 17.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ALLIANCE DATA SYSTEMS CORP has improved earnings per share by 8.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ALLIANCE DATA SYSTEMS CORP increased its bottom line by earning $7.43 versus $6.60 in the prior year. This year, the market expects an improvement in earnings ($12.32 versus $7.43).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the IT Services industry average. The net income increased by 6.5% when compared to the same quarter one year prior, going from $128.98 million to $137.40 million.
  • Net operating cash flow has increased to $333.11 million or 19.39% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -19.37%.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 49.95% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: ADS Ratings Report
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