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Automatic Data Processing (ADP) Q4 Earnings Top, Revenues Lag

Zacks Equity Research

Automatic Data Processing, Inc. ADP reported mixed fourth-quarter fiscal 2019 results, wherein the company’s earnings surpassed the Zacks Consensus Estimate but revenues missed the same.

Adjusted earnings per share of $1.14 beat the consensus mark by a penny and improved year over year. Total revenues of $3.49 billion missed the consensus mark by $5.1 million but improved year over year.

So far this year, shares of ADP have returned 25.9% compared with 29.8% rise of the industry it belongs to and 18.8% increase of the Zacks S&P 500 composite.


Let’s check out the numbers in detail.

Segment in Details

Employer Services revenues of $2.44 billion increased 4% year over year on a reported basis and 5% on an organic constant-currency basis. The number of employees on ADP clients' payrolls in the United States rose 2.8%. New business bookings increased 11% in the reported quarter.

PEO Services revenues were up 9% year over year to $1.06 billion. Average worksite employees paid by PEO Services were 563,000, up 8% from the prior-year quarter.

Interest on funds held for clients in fourth-quarter fiscal 2019 increased 17% to $147 million. The company’s average client funds balance climbed 5% year over year to $26.2 billion. Average interest yield on client funds was 2.3%, up 20 basis points (bps) on a year-over-year basis.


Adjusted EBIT came in at $669.1 million, up 7% on a year-over-year basis. Adjusted EBIT margin rose to 19.1% from 18.9% in the year-ago quarter. Adjusted EBIT margin benefited from continued execution of transformation initiatives and operating efficiencies, which were partially offset by incremental selling and amortization expense.

Segment-wise, Employer Services segment’s margin decreased 30 bps on a year-over-year basis. The same for PEO Services segment increased 70 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. price-consensus-eps-surprise-chart | Automatic Data Processing, Inc. Quote

Balance Sheet and Cash Flow

ADP exited fourth-quarter fiscal 2019 with cash and cash equivalents of $1.95 billion compared with $1.83 billion in the prior quarter. Long-term debt of $2.00 billion remained flat sequentially.

The company generated $732.3 million of net cash from operating activities in the reported quarter. Capital expenditures were $41.7 million.

The company paid dividends worth $343.4 million and repurchased shares worth $177.1 million.

Fiscal 2020 Outlook

ADP provided its guidance for fiscal 2020. Revenues are expected to register 6-7% growth. Adjusted earnings per share are expected to register 12-14% growth. The company expects adjusted EBIT margin growth of 100-125 bps. Adjusted effective tax rate is anticipated around 23.8%.

Zacks Rank & Upcoming Releases

Currently, ADP carries a Zacks Rank #4 (Sell).

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 second-quarter 2019 earnings of key players like Genpact G, Green Dot GDOT and Navigant Consulting NCI. While Genpact and Green Dot are slated to report on Aug 7, Navigant Consulting is scheduled to release results on Aug 8.

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