Alliance Data Systems
Alliance Data Systems (ADS) is in the business of helping other companies build customer loyalty. The company operates three main segments: LoyaltyOne, Epsilon and Private Label Services.
LoyaltyOne owns and operates the AIR MILES Rewards program, which allows consumers to accumulate points for their everyday purchases and redeem them for rewards like kitchen gadgets, electronics and vacations. While AIR MILES got its start in Canada back in 1992, similar LoyaltyOne programs have since spread to the U.K., the Netherlands, Spain, India, and recently Brazil. The company also offers consulting and analytics services.
Epsilon’s expertise is in direct marketing and advertising solutions, specializing in brand building, customer intelligence and predictive modeling. Finally, the company’s Private Label Services and Credit division offers credit card processing, billing and payment processing as well as collection services for private label retailers. Through these three units, the company serves clients in financial services, specialty retail, petroleum retail, automotive, hospitality, pharmaceuticals and a wide range of other markets. Its top clients include Merck (MRK), Ford (F), L Brands (LTD), FedEx (FDX) and Shell Oil (RDS.A, RDS.B).
And with consumer confidence once again declining due to what’s been happening in Washington, companies will need Alliance Data’s services to keep in sync with their customers. For this reason, I consider ADS a recession-proof stock: Alliance Data Systems has managed to grow sales and earnings each and every year since it went public in 2001. Given that this period included two major recessions, Alliance Data Systems has shown that it not only survives no matter the market environment, it thrives!
I expect this trend to hold true over the coming months. Consider the company’s recent third-quarter earnings announcement. The company reported 21% annual sales growth and 10% earnings growth, topping earnings estimates by 2 cents per share and sales estimates by $30 million. Looking ahead to 2014, the company expects core earnings of $12.00 per share on revenue of $4.27 billion, in line with analyst estimates. ADS is a stock we can feel good about holding for the long haul. This Conservative stock is an excellent buy below $247 per share.