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Automatic Data Processing (ADP) Q1 Earnings & Revenues Beat

Zacks Equity Research
·4 min read

Automatic Data Processing, Inc.ADP reported better-than-expected first-quarter fiscal 2021 results.

Adjusted earnings per share of $1.41 beat the Zacks Consensus Estimate by 45.4% but were flat year over year. Total revenues of $3.47 billion beat the consensus mark by 5.4% but declined 1% year over year on a reported basis as well as on an organic constant-currency basis.

So far this year, shares of ADP have lost 14.4% compared with 10.2% decline of the industry. In contrast, the Zacks S&P 500 composite has risen 5.2% in the said time frame.

Let’s check out the numbers in detail.

Segments in Detail

Employer Services revenues of $2.38 billion decreased 3% year over year on a reported as well as organic constant-currency basis. Pays per control decreased 9% year over year. New business bookings increased 2%.

PEO Services revenues were up 4% year over year to $1.09 billion. Average worksite employees paid by PEO Services were 547,000, down 3% from the prior-year quarter.

Interest on funds held for clients decreased 20% to $106 million. The company’s average client funds balances decreased 7% year over year to $22 billion. Average interest yield on client funds declined 30 basis points to 1.9%

Margins

Adjusted EBIT increased 5% year over year to $781 million. Adjusted EBIT margin grew 120 basis points to 22.5%, backed by transformation initiatives and disciplined expense management, which were partially offset by lower client fund interest revenue and growth in PEO zero-margin pass-throughs.

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

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

Automatic Data Processing, Inc. price-consensus-eps-surprise-chart | Automatic Data Processing, Inc. Quote

Balance Sheet and Cash Flow

ADP exited first-quarter fiscal 2021 with cash and cash equivalents of $1.61 billion compared with $1.91 billion in the prior quarter. Long-term debt was $1.99 billion compared with $1 billion at the end of the prior quarter.

The company generated $481.9 million of cash from operating activities in the quarter. Capital expenditures were $43.5 million. The company paid out dividends worth $391 million and repurchased shares worth $213.6 million.

Fiscal 2021 Outlook

ADP expects fiscal 2021 revenues to be down 1% to up 1%. Revenues were expected to decline 1% to 4% in the previous guidance. Adjusted earnings per share are anticipated to decline at a rate of 3-7% compared with the prior guidance of 13-18%. Adjusted effective tax rate is anticipated to be 23.1%.

Currently, ADP carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Business Services Companies

Equifax EFX reported better-than-expected third-quarter 2020 results, with adjusted earnings of $1.87 per share beating the Zacks Consensus Estimate by 16.2% and improving 26.4% on a year-over-year basis. The reported figure exceeded the guided range of $1.30-$1.40.

The Interpublic Group of Companies IPG reported better-than-expected third-quarter 2020 adjusted earnings of 53 cents per share, which beat the Zacks Consensus Estimate by 43.2% and improved 8.2% on a year-over-year basis.

IQVIA Holdings IQV reported solid third-quarter 2020 adjusted earnings per share of $1.63, which beat the consensus mark by 8% and improved 1.9% on a year-over-year basis. The reported figure was above the guided range of $1.47-$1.55.

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Equifax, Inc. (EFX) : Free Stock Analysis Report
 
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Zacks Investment Research