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Automatic Data Processing (ADP) Q1 Earnings Top, Revenues Lag
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Automatic Data Processing, Inc. (ADP - Free Report) reported mixed first-quarter fiscal 2020 results, wherein the company’s earnings surpassed the Zacks Consensus Estimate but revenues missed the same.
Adjusted earnings per share of $1.34 beat the consensus mark by a penny and improved 12% year over year. Total revenues of $3.49 billion missed the consensus mark by $12.2 million but improved year over year.
So far this year, shares of ADP have returned 24.2% compared with 24.7% rise of the industry it belongs to and 20.2% increase of the Zacks S&P 500 composite.
Let’s check out the numbers in detail.
Segments in Detail
Employer Services revenues of $2.44 billion increased 4% year over year on a reported basis and 5% on an organic constant-currency basis. The number of employees on ADP clients' payrolls in the United States rose 2.4%. New business bookings increased 6% in the reported quarter.
PEO Services revenues were up 8% year over year to $1.06 billion. Average worksite employees paid by PEO Services were 563,000, up 7% from the prior-year quarter.
Interest on funds held for clients in the first quarter of fiscal 2020 increased 13% to $134 million. The company’s average client funds balance climbed 7% year over year to $23.7 billion. Average interest yield on client funds was 2.3%, up 10 basis points (bps) on a year-over-year basis.
Adjusted EBIT came in at $745 million, up 8% on a year-over-year basis. Adjusted EBIT margin rose 60 basis points from the year-ago quarter to 21.3%. Adjusted EBIT margin benefited from continued execution of transformation initiatives and operating efficiencies, which were partially offset by incremental sales and marketing, amortization, and PEO pass-through expenses.
Segment-wise, Employer Services’ margin increased 50 bps on a year-over-year basis. The same for PEO Services declined 70 bps in the quarter.
Automatic Data Processing, Inc. Price, Consensus and EPS Surprise
ADP exited first-quarter fiscal 2020 with cash and cash equivalents of $1.40 billion compared with $1.95 billion in the prior quarter. Long-term debt came in at $1.00 billion compared with $2.00 billion in the prior quarter.
The company generated $432.8 million of net cash from operating activities in the reported quarter. Capital expenditures were $56.8 million.
The company paid out dividends worth $343.3 million and repurchased shares worth $309.7 million.
Fiscal 2020 Outlook
ADP reaffirmed its guidance for fiscal 2020. Revenues are expected to register 6-7% growth. Adjusted earnings per share are anticipated to register 12-14% growth. The company expects adjusted EBIT margin growth of 100-125 bps.
Investors interested in the broader Zacks Business Services sector are awaiting third-quarter 2019 earnings of key players like Fiserv , ICF International (ICFI - Free Report) and FLEETCOR Technologies , each scheduled to release results on Nov 6.
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Automatic Data Processing (ADP) Q1 Earnings Top, Revenues Lag
Automatic Data Processing, Inc. (ADP - Free Report) reported mixed first-quarter fiscal 2020 results, wherein the company’s earnings surpassed the Zacks Consensus Estimate but revenues missed the same.
Adjusted earnings per share of $1.34 beat the consensus mark by a penny and improved 12% year over year. Total revenues of $3.49 billion missed the consensus mark by $12.2 million but improved year over year.
So far this year, shares of ADP have returned 24.2% compared with 24.7% rise of the industry it belongs to and 20.2% increase of the Zacks S&P 500 composite.
Let’s check out the numbers in detail.
Segments in Detail
Employer Services revenues of $2.44 billion increased 4% year over year on a reported basis and 5% on an organic constant-currency basis. The number of employees on ADP clients' payrolls in the United States rose 2.4%. New business bookings increased 6% in the reported quarter.
PEO Services revenues were up 8% year over year to $1.06 billion. Average worksite employees paid by PEO Services were 563,000, up 7% from the prior-year quarter.
Interest on funds held for clients in the first quarter of fiscal 2020 increased 13% to $134 million. The company’s average client funds balance climbed 7% year over year to $23.7 billion. Average interest yield on client funds was 2.3%, up 10 basis points (bps) on a year-over-year basis.
Automatic Data Processing, Inc. Revenue (TTM)
Automatic Data Processing, Inc. revenue-ttm | Automatic Data Processing, Inc. Quote
Margins
Adjusted EBIT came in at $745 million, up 8% on a year-over-year basis. Adjusted EBIT margin rose 60 basis points from the year-ago quarter to 21.3%. Adjusted EBIT margin benefited from continued execution of transformation initiatives and operating efficiencies, which were partially offset by incremental sales and marketing, amortization, and PEO pass-through expenses.
Segment-wise, Employer Services’ margin increased 50 bps on a year-over-year basis. The same for PEO Services declined 70 bps in the quarter.
Automatic Data Processing, Inc. Price, Consensus and EPS Surprise
Automatic Data Processing, Inc. price-consensus-eps-surprise-chart | Automatic Data Processing, Inc. Quote
Balance Sheet and Cash Flow
ADP exited first-quarter fiscal 2020 with cash and cash equivalents of $1.40 billion compared with $1.95 billion in the prior quarter. Long-term debt came in at $1.00 billion compared with $2.00 billion in the prior quarter.
The company generated $432.8 million of net cash from operating activities in the reported quarter. Capital expenditures were $56.8 million.
The company paid out dividends worth $343.3 million and repurchased shares worth $309.7 million.
Fiscal 2020 Outlook
ADP reaffirmed its guidance for fiscal 2020. Revenues are expected to register 6-7% growth. Adjusted earnings per share are anticipated to register 12-14% growth. The company expects adjusted EBIT margin growth of 100-125 bps.
Zacks Rank & Upcoming Releases
Currently, ADP carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Investors interested in the broader Zacks Business Services sector are awaiting third-quarter 2019 earnings of key players like Fiserv , ICF International (ICFI - Free Report) and FLEETCOR Technologies , each scheduled to release results on Nov 6.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>