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ADP Strongly Positioned in HCM Market, Expense Woes Stay
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Automatic Data Processing, Inc. (ADP - Free Report) is currently benefiting from its three-tier business strategy and a strong business model.
The company recently reported better-than-expected second-quarter fiscal 2021 results. Adjusted earnings per share of $1.52 beat the Zacks Consensus Estimate by 17.8% and were flat year over year. Total revenues of $3.69 billion beat the consensus mark by 3.2% and improved slightly year over year.
ADP’s shares have gained 26.5% over the past six months, outperforming the 19% rally of the industry it belongs to.
Strongly Positioned in Human Capital Management Market
ADP’s three-tier business strategy helps it maintain and grow its strong position as a human capital management (“HCM”) technology and services provider. The company is focused on delivering a complete suite of cloud-based HCM and HR Outsourcing solutions. It is expanding its international HCM and HRO businesses with established local, in-country software solutions and cloud-based multi-country solutions.
ADP has a strong business model, high recurring revenues, good margins, robust client retention and low capital expenditure. It has a strong cash-generating ability that allows it to pursue growth in areas that exhibit true potential.
Strategic Acquisitions Helping International Expansion
Strategic acquisitions like Celergo, WorkMarket, Global Cash Card and The Marcus Buckingham Company have strengthened ADP’s customer base and are helping it expand operations in international markets. The company continues to pursue acquisitions that strategically fit its overall business mix and are easy to integrate over the long term.
Higher Expenses a Concern
ADP is seeing an increase in expenses as it continues to acquire companies and invest in transformation efforts. PEO Services benefits’ pass-through costs and selling expenses are on a rise. In fiscal 2020, ADP’s total expenses of $11.5 billion increased 3% year over year. Total expenses increased 3.7% year over year in fiscal 2019 and 7.7% in fiscal 2018. Hence, the bottom line is likely to remain under pressure going forward.
The long-term expected earnings per share (three to five years) growth rate for Gartner, NV5 Global and TeleTech is pegged at 13.5%, 18% and 19.4%, respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Image: Bigstock
ADP Strongly Positioned in HCM Market, Expense Woes Stay
Automatic Data Processing, Inc. (ADP - Free Report) is currently benefiting from its three-tier business strategy and a strong business model.
The company recently reported better-than-expected second-quarter fiscal 2021 results. Adjusted earnings per share of $1.52 beat the Zacks Consensus Estimate by 17.8% and were flat year over year. Total revenues of $3.69 billion beat the consensus mark by 3.2% and improved slightly year over year.
ADP’s shares have gained 26.5% over the past six months, outperforming the 19% rally of the industry it belongs to.
Strongly Positioned in Human Capital Management Market
ADP’s three-tier business strategy helps it maintain and grow its strong position as a human capital management (“HCM”) technology and services provider. The company is focused on delivering a complete suite of cloud-based HCM and HR Outsourcing solutions. It is expanding its international HCM and HRO businesses with established local, in-country software solutions and cloud-based multi-country solutions.
ADP has a strong business model, high recurring revenues, good margins, robust client retention and low capital expenditure. It has a strong cash-generating ability that allows it to pursue growth in areas that exhibit true potential.
Strategic Acquisitions Helping International Expansion
Strategic acquisitions like Celergo, WorkMarket, Global Cash Card and The Marcus Buckingham Company have strengthened ADP’s customer base and are helping it expand operations in international markets. The company continues to pursue acquisitions that strategically fit its overall business mix and are easy to integrate over the long term.
Higher Expenses a Concern
ADP is seeing an increase in expenses as it continues to acquire companies and invest in transformation efforts. PEO Services benefits’ pass-through costs and selling expenses are on a rise. In fiscal 2020, ADP’s total expenses of $11.5 billion increased 3% year over year. Total expenses increased 3.7% year over year in fiscal 2019 and 7.7% in fiscal 2018. Hence, the bottom line is likely to remain under pressure going forward.
Zacks Rank and Stocks to Consider
ADP currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Zacks Business Services sector are Gartner (IT - Free Report) , NV5 Global (NVEE - Free Report) and TeleTech Holdings (TTEC - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term expected earnings per share (three to five years) growth rate for Gartner, NV5 Global and TeleTech is pegged at 13.5%, 18% and 19.4%, respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Click here for the 4 trades >>