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Why Is ADP (ADP) Up 11.8% Since Last Earnings Report?
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It has been about a month since the last earnings report for Automatic Data Processing (ADP - Free Report) . Shares have added about 11.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is ADP due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Automatic Data Processing Q1 Earnings & Revenues Beat
Automatic Data Processing reported better-than-expected first-quarter fiscal 2023 results.
Adjusted earnings per share (excluding a penny from non-recurring items) of $1.86 beat the Zacks Consensus Estimate by 4.5% and grew 12.7% from the year-ago fiscal quarter’s reading Total revenues of $4.22 billion beat the consensus mark by 1.5% and improved 10% From the year-ago fiscal quarter’s reading on a reported basis and 11% on an organic constant-currency basis.
Let’s check out the numbers in detail:
Segments in Detail
Employer Services revenues of $2.8 billion increased 9% on a reported basis and 11% on an organic constant-currency basis. Pays per control increased 6% from the year-ago fiscal quarter’s reading.
PEO Services revenues were up 13% year over year to $1.43 billion. Average worksite employees paid by PEO Services were 704,000, up 12% from the year-ago fiscal quarter’s reading.
Interest on funds held for clients increased 39% to $141 million. ADP’s average client funds balances increased 9% to $29.4 billion. Average interest yield on client funds expanded 40 basis points to 1.9%.
Margins
Adjusted EBIT increased 11% from the year-ago fiscal quarter’s reading to $1 billion. Adjusted EBIT margin grew 30 basis points to 24.1%.
ADP exited first-quarter fiscal 2022 with cash and cash equivalents of $1.21 billion compared with $1.44 billion in the prior fiscal quarter. Long-term debt of $2.99 billion was flat sequentially.
Automatic Data Processing generated $718.1 million of cash from operating activities in the quarter. Capital expenditures were $45.4 million. ADP paid out dividends worth $432.9 million and repurchased shares worth $333.3 million.
Fiscal 2023 Outlook
ADP expects revenues to register 8-9% growth (prior view: 7-9% growth). Adjusted EPS is now expected to register 15-17% growth (prior view: 13-16%). Adjusted effective tax rate is estimated to be approximately at 23%. Automatic Data Processing expects Employer Services revenues to grow at a rate of about 7-8% (prior view: 6-8%), while PEO Services revenues are still expected to grow at 10-12% rate.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, ADP has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise ADP has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is ADP (ADP) Up 11.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Automatic Data Processing (ADP - Free Report) . Shares have added about 11.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is ADP due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Automatic Data Processing Q1 Earnings & Revenues Beat
Automatic Data Processing reported better-than-expected first-quarter fiscal 2023 results.
Adjusted earnings per share (excluding a penny from non-recurring items) of $1.86 beat the Zacks Consensus Estimate by 4.5% and grew 12.7% from the year-ago fiscal quarter’s reading Total revenues of $4.22 billion beat the consensus mark by 1.5% and improved 10% From the year-ago fiscal quarter’s reading on a reported basis and 11% on an organic constant-currency basis.
Let’s check out the numbers in detail:
Segments in Detail
Employer Services revenues of $2.8 billion increased 9% on a reported basis and 11% on an organic constant-currency basis. Pays per control increased 6% from the year-ago fiscal quarter’s reading.
PEO Services revenues were up 13% year over year to $1.43 billion. Average worksite employees paid by PEO Services were 704,000, up 12% from the year-ago fiscal quarter’s reading.
Interest on funds held for clients increased 39% to $141 million. ADP’s average client funds balances increased 9% to $29.4 billion. Average interest yield on client funds expanded 40 basis points to 1.9%.
Margins
Adjusted EBIT increased 11% from the year-ago fiscal quarter’s reading to $1 billion. Adjusted EBIT margin grew 30 basis points to 24.1%.
Employer Services segment margin increased 50 bps. PEO Services segment margin surged 80 bps.
Balance Sheet and Cash Flow
ADP exited first-quarter fiscal 2022 with cash and cash equivalents of $1.21 billion compared with $1.44 billion in the prior fiscal quarter. Long-term debt of $2.99 billion was flat sequentially.
Automatic Data Processing generated $718.1 million of cash from operating activities in the quarter. Capital expenditures were $45.4 million. ADP paid out dividends worth $432.9 million and repurchased shares worth $333.3 million.
Fiscal 2023 Outlook
ADP expects revenues to register 8-9% growth (prior view: 7-9% growth). Adjusted EPS is now expected to register 15-17% growth (prior view: 13-16%). Adjusted effective tax rate is estimated to be approximately at 23%.
Automatic Data Processing expects Employer Services revenues to grow at a rate of about 7-8% (prior view: 6-8%), while PEO Services revenues are still expected to grow at 10-12% rate.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, ADP has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise ADP has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.