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ADP Q3 Earnings Top Estimates, Revenues Lag, '19 EPS View Up

Zacks Equity Research

Automatic Data Processing, Inc.’s ADP third-quarter fiscal 2019 adjusted earnings per share (EPS) of $1.77 beat the Zacks Consensus Estimate by 8 cents and improved year over year. Total revenues of $3.85 billion missed the consensus mark by $56 million but improved year over year.

So far this year, shares of ADP have gained 25.4% compared with 26.5% rise of the industry it belongs to and 17.1% increase of the Zacks S&P 500 composite.


Let’s check out the numbers in detail.

Segment in Details

Employer Services revenues of $2.72 billion increased 3% year over year on a reported basis and 4% on an organic constant-currency basis. The number of employees on ADP clients' payrolls in the United States rose 3.1%. New business bookings increased 10% in the reported quarter.

PEO Services revenues were up 6% year over year to $1.13 billion. Average worksite employees paid by PEO Services were 554,000, up 8% from the prior-year quarter.

Interest on funds held for clients in the third-quarter fiscal 2019 increased 24% to $167 million. The company’s average client funds balance climbed 4% year over year to $30 billion. Average interest yield on client funds was 2.2%, up 30 basis points (bps) on a year-over-year basis.


Adjusted EBIT came in at $1.01 billion, up 10% on a year-over-year basis. Adjusted EBIT margin rose to 26.3% from 25% in the year-ago quarter. Adjusted EBIT margin benefited from continued execution of transformation initiatives and operating leverage.

Segment-wise, Employer Services segment’s margin increased 230 bps on a year-over-year basis. The same for PEO Services segment decreased 10 bps in the quarter.

Automatic Data Processing, Inc. Price, Consensus and EPS Surprise


Automatic Data Processing, Inc. Price, Consensus and EPS Surprise | Automatic Data Processing, Inc. Quote

Balance Sheet and Cash Flow

ADP exited third-quarter fiscal 2019 with cash and cash equivalents of $1.83 billion compared with $2.79 billion in the prior quarter. Long-term debt of $2.00 billion remained flat sequentially.

The company generated $1.02 billion of net cash from operating activities in the reported quarter. Capital expenditures were $40.3 million.

The company paid dividends worth $344.6 million and repurchased shares worth $234 million.

Fiscal 2019 Outlook

ADP raised its fiscal 2019 guidance for adjusted earnings and adjusted EBIT margin growth while reaffirming the same for revenue growth.

In fiscal 2019, revenues are expected to register 6-7% growth.

Adjusted earnings per share are expected to register 19-20% growth compared with 17-19% growth guided earlier. The company expects adjusted EBIT margin growth of 150 basis points (bps) compared with 125 to 150 bps guided earlier. Adjusted effective tax rate is anticipated around 23.8% compared with 24.4% guided earlier.

Zacks Rank & Upcoming Releases

Currently, ADP carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Zacks Business Services sector are awaiting first-quarter 2019 earnings reports of key players like Aptiv APTV, S&P Global SPGI and CRA International CRAI. All of them are slated to report on May 2, before market open.

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