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Automatic Data Processing (ADP) Q4 Earnings, Revenues Beat

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Automatic Data Processing, Inc.(ADP - Free Report) reported better-than-expected fourth-quarter fiscal 2020 results.

Adjusted earnings per share of $1.14 beat the Zacks Consensus Estimate by 18.8% and remained flat year over year. Total revenues of $3.38 billion beat the consensus mark by 2.6% but declined 3% year over year on a reported basis and 2% on an organic constant-currency basis.

So far this year, shares of ADP have lost 14% compared with 13.1% decline of the industry. In contrast, the Zacks S&P 500 composite has risen 0.7% in the said time frame.

 

Let’s check out the numbers in detail.

Segments in Detail

Employer Services revenues of $2.29 billion decreased 6% year over year on a reported basis and 5% on organic constant-currency basis. Pays per control decreased 10.8% year over year. New business bookings decreased 67%.

PEO Services revenues were up 4% year over year to $1.08 billion. Average worksite employees paid by PEO Services were 548,000, down 3% from the prior-year quarter.

Interest on funds held for clients decreased 22% to $114.8 million. The company’s average client funds balances decreased 8% year over year to $24 billion. Average interest yield on client funds declined 30 basis points to 1.9%

Margins

Adjusted EBIT decreased 2% year over year to $653 million. Adjusted EBIT margin grew 10 basis points from the year-ago quarter to 19.3%, backed by prudent expense management and cost savings related to transformation initiatives, which were partially offset by a decline in revenues combined with ADP's continued investment in sales, services and products.

Balance Sheet and Cash Flow

ADP exited fourth-quarter fiscal 2020 with cash and cash equivalents of $1.91 billion compared with $1.71 billion in the prior quarter. Long-term debt of $1 billion was flat year over year.

The company generated $776.6 million of cash from operating activities in the quarter. Capital expenditures were $33.4 million. The company paid out dividends worth $391.6 million and did not repurchase any shares.

Fiscal 2021 Outlook

ADP expects revenues to decline at a rate of 1-4%. Adjusted earnings per share are anticipated to decline at a rate of 13-18%. The company expects adjusted EBIT margin to be down 300 basis points. 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 - Free Report) reported better-than-expected second-quarter 2020 adjusted earnings of $1.60 per share, whichbeat the Zacks Consensus Estimate by 22.1% and improved 14.3% on a year-over-year basis. The reported figure exceeded the guided range of 78-88 cents.

IQVIA Holdings (IQV - Free Report) reported second-quarter 2020 adjusted earnings per share of $1.18, which beat the consensus mark by 12.4% but decreased 22.9% on a year-over-year basis. The reported figure exceeded the guided range of $1.00-$1.09.

Robert Half (RHI - Free Report) reported second-quarter 2020 earnings of 41 cents per share beat the consensus mark by 17% but were down 58% year over year.

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