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What Awaits Automatic Data Processing (ADP) in Q2 Earnings?

Zacks Equity Research

Automatic Data Processing, Inc. ADP is scheduled to report second-quarter fiscal 2020 results on Jan 29, before market open.

Over the past year, shares of ADP have gained 34.6% compared with 31% growth of the industry it belongs to.

 

 

Let’s check out how things have shaped up for the announcement.

Top-Line Expectations

The Zacks Consensus Estimate for revenues stands at $3.68 billion, indicating growth of 5.1% from the year-ago quarter reported figure.

Going by segments, the consensus mark for Employer Services revenues stands at $2.56 billion, indicating an increase of 4.3% from the year-ago period reported figure. Contributions from new business started from New Business Bookings, solid retention, acquisitions and interest earned on funds held for clients are likely to have partially offset the unfavorable impact from foreign currency movements.

The consensus estimate for PEO Services revenues is pegged at $1.12 billion, indicating year-over-year growth of 6.2%. The segment is likely to have been driven by increase in the average number of worksite employees.

In first-quarter fiscal 2020, total revenues of $3.49 billion increased 5.2% year over year.

Bottom-Line Expectations

Continued strength in margin performance, lower adjusted effective tax rate and fewer shares outstanding are likely to have boosted ADP’s bottom line. The Zacks Consensus Estimate for earnings per share is pegged at $1.45, indicating growth of 8.2% year over year. In first-quarter fiscal 2020, adjusted earnings per share of $1.34 increased 12% year over year.

What Our Model Says

Our proven Zacks model does not conclusively predict an earnings beat for ADP this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

ADP has an Earnings ESP of 0.00% and a Zacks Rank #4.

Stocks to Consider

Here are a few stocks from the broader Zacks Business Services sector that investors may consider as our model shows that these have the right combination of elements to beat on earnings this season:

Waste Management WM has an Earnings ESP of +4.43% and a Zacks Rank #2. The company is slated to report results on Feb 13. You can see the complete list of today’s Zacks #1 Rank stocks here

S&P Global SPGI has an Earnings ESP of +1.04% and a Zacks Rank #2. The company is slated to report results on Feb 6.

Fidelity National Information Services, Inc. FIS has an Earnings ESP of +0.45% and a Zacks Rank #2. The company is slated to release results on Feb 13.

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S&P Global Inc. (SPGI) : Free Stock Analysis Report
 
Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report
 
Fidelity National Information Services, Inc. (FIS) : Free Stock Analysis Report
 
Waste Management, Inc. (WM) : Free Stock Analysis Report
 
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