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Automatic Data Processing (ADP) Q1 Earnings & Revenues Beat

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Automatic Data Processing, Inc.(ADP - Free Report) 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.

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 - Free Report) 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 - Free Report) 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 - Free Report) 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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