Automatic Data Processing, Inc.(ADP - Free Report) third-quarter fiscal 2020 earnings came in line with the Zacks Consensus Estimate while revenues surpassed the same.
Adjusted earnings per share of $1.92 improved 8.5% year over year. Total revenues of $4.04 billion beat the consensus mark by 0.2% and improved 6% 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 16.2% compared with an 18.3% decline of the industry and 10.8% decline of the Zacks S&P 500 composite.
Let’s check out the numbers in detail.
Segments in Detail
Employer Services revenues of $2.81 billion increased 3% year over year on a reported basis and 4% on organic constant-currency basis. Pays per control rose 1.9% year over year. New business bookings decreased 9%.
PEO Services revenues were up 11% year over year to $1.24 billion. Average worksite employees paid by PEO Services were 595,000, up 7% from the prior-year quarter.
Interest on funds held for clients decreased 5% to $159 million. The company’s average client funds balances climbed 4% year over year to $31.3 billion. Average interest yield on client funds declined 20 basis points to 2%
Margins
Adjusted EBIT came in at $1.09 billion, up 8% on a year-over-year basis. Adjusted EBIT margin rose 60 basis points from the year-ago quarter to 27.1%. Adjusted EBIT margin benefited from continued execution of transformation initiatives and operating efficiencies, which were partially offset by the cost of a one-time global associate assistance payment related to COVID-19 and incremental amortization and PEO pass-through expenses.
Balance Sheet and Cash Flow
ADP exited third-quarter fiscal 2020 with cash and cash equivalents of $1.71 billion compared with $1.5 billion in the prior quarter. Long-term debt of $1 billion was flat year over year.
The company generated $1.12 billion of cash from operating activities in the quarter. Capital expenditures were $38.6 million. The company paid out dividends worth $392.9 million and repurchased shares worth $391.2 million.
Fiscal 2020 Outlook
ADP expects revenues to register about 3% growth compared with the prior growth rate of 6%. Adjusted earnings per share are anticipated to register 4-7% growth compared with the prior growth rate of 12-14%. The company expects adjusted EBIT margin to be down 25 to up 25 basis points compared to the prior growth guidance of 100-125 basis points. Adjusted effective tax rate is anticipated to be 22.9% compared with the prior rate of 23.2%.
Currently, ADP carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Business Services Companies
The Interpublic Group of Companies, Inc. (IPG - Free Report) reported first-quarter 2020 adjusted earnings of 11 cents per share, which beat the consensus mark by 22.2% but remained flat on a year-over-year basis.
Equifax Inc. (EFX - Free Report) reported first-quarter 2020 adjusted earnings of $1.40 per share, which beat the consensus mark by 8.5% and improved 16% on a year-over-year basis.
ManpowerGroup Inc. (MAN - Free Report) reported first-quarter 2020 adjusted earnings of 71 cents per share, which missed the Zacks Consensus Estimate by 2.7% and slumped 48.9% year over year.
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Automatic Data Processing, Inc.(ADP - Free Report) third-quarter fiscal 2020 earnings came in line with the Zacks Consensus Estimate while revenues surpassed the same.
Adjusted earnings per share of $1.92 improved 8.5% year over year. Total revenues of $4.04 billion beat the consensus mark by 0.2% and improved 6% 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 16.2% compared with an 18.3% decline of the industry and 10.8% decline of the Zacks S&P 500 composite.
Let’s check out the numbers in detail.
Segments in Detail
Employer Services revenues of $2.81 billion increased 3% year over year on a reported basis and 4% on organic constant-currency basis. Pays per control rose 1.9% year over year. New business bookings decreased 9%.
PEO Services revenues were up 11% year over year to $1.24 billion. Average worksite employees paid by PEO Services were 595,000, up 7% from the prior-year quarter.
Interest on funds held for clients decreased 5% to $159 million. The company’s average client funds balances climbed 4% year over year to $31.3 billion. Average interest yield on client funds declined 20 basis points to 2%
Margins
Adjusted EBIT came in at $1.09 billion, up 8% on a year-over-year basis. Adjusted EBIT margin rose 60 basis points from the year-ago quarter to 27.1%. Adjusted EBIT margin benefited from continued execution of transformation initiatives and operating efficiencies, which were partially offset by the cost of a one-time global associate assistance payment related to COVID-19 and incremental amortization and PEO pass-through expenses.
Balance Sheet and Cash Flow
ADP exited third-quarter fiscal 2020 with cash and cash equivalents of $1.71 billion compared with $1.5 billion in the prior quarter. Long-term debt of $1 billion was flat year over year.
The company generated $1.12 billion of cash from operating activities in the quarter. Capital expenditures were $38.6 million. The company paid out dividends worth $392.9 million and repurchased shares worth $391.2 million.
Fiscal 2020 Outlook
ADP expects revenues to register about 3% growth compared with the prior growth rate of 6%. Adjusted earnings per share are anticipated to register 4-7% growth compared with the prior growth rate of 12-14%. The company expects adjusted EBIT margin to be down 25 to up 25 basis points compared to the prior growth guidance of 100-125 basis points. Adjusted effective tax rate is anticipated to be 22.9% compared with the prior rate of 23.2%.
Currently, ADP carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Business Services Companies
The Interpublic Group of Companies, Inc. (IPG - Free Report) reported first-quarter 2020 adjusted earnings of 11 cents per share, which beat the consensus mark by 22.2% but remained flat on a year-over-year basis.
Equifax Inc. (EFX - Free Report) reported first-quarter 2020 adjusted earnings of $1.40 per share, which beat the consensus mark by 8.5% and improved 16% on a year-over-year basis.
ManpowerGroup Inc. (MAN - Free Report) reported first-quarter 2020 adjusted earnings of 71 cents per share, which missed the Zacks Consensus Estimate by 2.7% and slumped 48.9% year over year.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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