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Automatic Data Processing Q2 Earnings & Revenues Beat Estimates

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Automatic Data Processing, Inc. (ADP - Free Report) has reported impressive second-quarter fiscal 2025 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate.

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ADP’s earnings per share of $2.4 beat the consensus estimate by 3.5% and increased 10.3% from the year-ago quarter. Total revenues of $5 billion surpassed the consensus estimate by 1.6% and grew 8.2% on a year-over-year basis.

The ADP stock has gained 17.3% in the past six months, underperforming the 17.8% rally of its industry while outperforming the 13% rise of the Zacks S&P 500 Composite.

Six-Month Price Performance

 

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ADP’s Segmental Results

Employer Services’ revenues of $3.4 billion increased 8% on a reported basis and 7% at constant currency, meeting our estimate. Pays per control increased 1% from the year-ago quarter.

PEO Services’ revenues gained 8% from the year-ago quarter to $1.7 billion and missed our projection of $1.6 billion for the second quarter of fiscal 2025. Average worksite employees paid by PEO Services were 746,000, rising 3% from the year-ago quarter.

Interest on funds held for clients grew 21% from the year-ago quarter to $273 million and outpaced our estimate of $272.3 million. ADP’s average client funds balance rose 8% to $35.3 billion. The average interest yield on client funds expanded 30 basis points to 3.1%.

Automatic Data Processing’s Margins

Adjusted EBIT increased 11% on a year-over-year basis to $1.3 billion. The adjusted EBIT margin rose 60 basis points (bps) to 25.2%.

The margin of Employer Services increased 90 bps, while PEO Services decreased 140 bps.

Balance Sheet & Cash Flow of ADP

Automatic Data Processing exited second-quarter fiscal 2025 with cash and cash equivalents of $2.2 billion compared with $2.1 billion at the end of the preceding quarter. The long-term debt of $3 billion was flat with the preceding quarter.

The company generated $1.2 billion in cash from operating activities in the quarter.

Automatic Data Processing’s FY25 Outlook

For fiscal 2025, ADP expects revenue growth of 6-7%. Adjusted EPS growth is anticipated to be 7-9%. The adjusted effective tax rate is estimated to be 23%. The guidance for adjusted EBIT margin is expected to be 30-50 bps.

Automatic Data Processing expects Employer Services’ revenue to grow 6-7%. The guidance for PEO Services’ revenue growth is at 5-6%.

ADP carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Snapshot

Accenture plc (ACN - Free Report) reported better-than-expected first-quarter fiscal 2025 results.

ACN’s earnings (excluding 13 cents from non-recurring items) of $3.6 per share outpaced the Zacks Consensus Estimate by 6.2% and increased 28.7% from the year-ago quarter. Total revenues of $17.7 billion beat the consensus estimate by 3.1% and gained 9.1% on a year-over-year basis.

FactSet Research Systems, Inc. (FDS - Free Report) posted impressive first-quarter fiscal 2025 results.

FDS’s earnings per share (excluding 48 cents from non-recurring items) of $4.4 beat the consensus mark by 1.6% and increased 6.1% from the year-ago quarter. Revenues of $568.7 million surpassed the Zacks Consensus Estimate by a slight margin and gained 4.9% from the year-ago quarter.


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