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Automatic Data Processing (ADP) Q4 Earnings Beat, Rise Y/Y
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Automatic Data Processing, Inc. (ADP - Free Report) reported better-than-expected fourth-quarter fiscal 2023 results.
Adjusted earnings per share of $1.89 (excluding 1 cent from non-recurring items) beat the Zacks Consensus Estimate by 3.3% and grew 26% from the year-ago quarter.
Total revenues of $4.47 billion beat the consensus estimate by 1.8% and improved 8.5% from the year-ago quarter’s reading on a reported basis and 9% on an organic constant-currency basis.
Automatic Data Processing, Inc. Price, Consensus and EPS Surprise
Employer Services’ revenues of $2.78 billion increased 11% on a reported and organic constant-currency basis and beat our estimates by 1.8%. Pays per control increased 3% from the year-ago fiscal quarter’s reading.
PEO Services’ revenues were up 4% year over year to $1.46 billion, which matched our estimate. Average number of worksite employees paid by PEO Services were 722,000, up 3% from the year-ago fiscal quarter’s figure.
Interest on funds held for clients increased 86% to $235.7 million. ADP’s average client funds balance increased 3% to $34.7 billion. Average interest yield on client funds expanded 120 basis points (bps) to 2.7%.
Margins
Adjusted EBIT increased 23% from the year-ago fiscal quarter’s reading to $1 billion. Adjusted EBIT margin grew 270 bps to 22.5%.
The margin of Employer Services increased 480 bps while PEO Services’ margin declined 110 bps.
Balance Sheet and Cash Flow
ADP exited fourth-quarter fiscal 2022 with cash and cash equivalents of $2.08 billion, compared with $1.83 billion in the prior fiscal quarter. Long-term debt of $2.99 billion was flat sequentially.
Automatic Data Processing generated $1.19 billion in cash from operating activities in the quarter. Capital expenditures were $60.9 million.
FY24 Outlook
ADP expects revenues to register 6-7% growth. Adjusted earnings per share is expected to see 10-12% growth. The adjusted effective tax rate is estimated to be approximately 23%. Adjusted EBIT margin is expected to grow 60-80 bps.
Automatic Data Processing expects Employer Services revenues to grow at a rate of about 7-8%, while PEO Services revenues are expected to grow at 3-5%.
Interpublic Group of Companies (IPG - Free Report) second-quarter 2023 earnings surpassed the Zacks Consensus Estimate while revenues missed the same. Adjusted earnings (considering 6 cents from non-recurring items) came in at 74 cents per share, beating the consensus estimate by 23.3% but declining 17.5% on a year-over-year basis. Net revenues of $2.33 billion missed the consensus estimate by 2.9% and decreased 14.9% on a year-over-year basis. Total revenues of $2.67 billion decreased 2.6% year over year.
Equifax (EFX - Free Report) reported mixed second-quarter 2023 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings (excluding 59 cents from non-recurring items) came in at $1.71 per share, beating the consensus mark by 2.4% but declining 18.2% from the year-ago figure. Total revenues of $1.32 billion missed the consensus estimate by 0.4% while matching the year-ago figure on a reported basis. The top line gained 1% on a local-currency basis.
ManpowerGroup (MAN - Free Report) reported lower-than-expected results. Second-quarter adjusted earnings of $1.58 per share lagged the Zacks Consensus Estimate by 1.9% and declined 32.2% year over year, owing to restructuring costs and Argentina-related non-cash currency translation losses. Revenues of $4.9 billion missed the consensus mark by 0.6% and decreased 4.3% year over year on a reported basis. The same decreased 3% on a constant-currency basis.
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Automatic Data Processing (ADP) Q4 Earnings Beat, Rise Y/Y
Automatic Data Processing, Inc. (ADP - Free Report) reported better-than-expected fourth-quarter fiscal 2023 results.
Adjusted earnings per share of $1.89 (excluding 1 cent from non-recurring items) beat the Zacks Consensus Estimate by 3.3% and grew 26% from the year-ago quarter.
Total revenues of $4.47 billion beat the consensus estimate by 1.8% and improved 8.5% from the year-ago quarter’s reading on a reported basis and 9% on an organic constant-currency basis.
Automatic Data Processing, Inc. Price, Consensus and EPS Surprise
Automatic Data Processing, Inc. price-consensus-eps-surprise-chart | Automatic Data Processing, Inc. Quote
Q4 in Detail
Segments
Employer Services’ revenues of $2.78 billion increased 11% on a reported and organic constant-currency basis and beat our estimates by 1.8%. Pays per control increased 3% from the year-ago fiscal quarter’s reading.
PEO Services’ revenues were up 4% year over year to $1.46 billion, which matched our estimate. Average number of worksite employees paid by PEO Services were 722,000, up 3% from the year-ago fiscal quarter’s figure.
Interest on funds held for clients increased 86% to $235.7 million. ADP’s average client funds balance increased 3% to $34.7 billion. Average interest yield on client funds expanded 120 basis points (bps) to 2.7%.
Margins
Adjusted EBIT increased 23% from the year-ago fiscal quarter’s reading to $1 billion. Adjusted EBIT margin grew 270 bps to 22.5%.
The margin of Employer Services increased 480 bps while PEO Services’ margin declined 110 bps.
Balance Sheet and Cash Flow
ADP exited fourth-quarter fiscal 2022 with cash and cash equivalents of $2.08 billion, compared with $1.83 billion in the prior fiscal quarter. Long-term debt of $2.99 billion was flat sequentially.
Automatic Data Processing generated $1.19 billion in cash from operating activities in the quarter. Capital expenditures were $60.9 million.
FY24 Outlook
ADP expects revenues to register 6-7% growth. Adjusted earnings per share is expected to see 10-12% growth. The adjusted effective tax rate is estimated to be approximately 23%. Adjusted EBIT margin is expected to grow 60-80 bps.
Automatic Data Processing expects Employer Services revenues to grow at a rate of about 7-8%, while PEO Services revenues are expected to grow at 3-5%.
Currently, ADP carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Snapshot
Interpublic Group of Companies (IPG - Free Report) second-quarter 2023 earnings surpassed the Zacks Consensus Estimate while revenues missed the same. Adjusted earnings (considering 6 cents from non-recurring items) came in at 74 cents per share, beating the consensus estimate by 23.3% but declining 17.5% on a year-over-year basis. Net revenues of $2.33 billion missed the consensus estimate by 2.9% and decreased 14.9% on a year-over-year basis. Total revenues of $2.67 billion decreased 2.6% year over year.
Equifax (EFX - Free Report) reported mixed second-quarter 2023 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings (excluding 59 cents from non-recurring items) came in at $1.71 per share, beating the consensus mark by 2.4% but declining 18.2% from the year-ago figure. Total revenues of $1.32 billion missed the consensus estimate by 0.4% while matching the year-ago figure on a reported basis. The top line gained 1% on a local-currency basis.
ManpowerGroup (MAN - Free Report) reported lower-than-expected results. Second-quarter adjusted earnings of $1.58 per share lagged the Zacks Consensus Estimate by 1.9% and declined 32.2% year over year, owing to restructuring costs and Argentina-related non-cash currency translation losses. Revenues of $4.9 billion missed the consensus mark by 0.6% and decreased 4.3% year over year on a reported basis. The same decreased 3% on a constant-currency basis.