Automatic Data Processing Inc.
) reported fourth-quarter 2013 earnings of 55 cents per share
from continuing operations, which lagged the Zacks Consensus
Estimate by couple of cents. Reported earnings per share
increased 6.0% from the year-ago quarter.
Revenues increased 7% year over year to $2.81 billion but
failed to beat the Zacks Consensus Estimate of $2.82 billion. The
year-over-year revenue growth was driven by strong performance of
the Employer Services, PEO Services and Dealer Services
Employer Services revenues increased 8% year over year to
$1.97 billion. The number of employees on clients' payrolls in
the United States grew 2.8% in the quarter on a same-store-sales
basis. Client retention increased by 0.8 percentage points on a
PEO Services revenues increased 11.0% year over year to $490.1
million in the reported quarter. Dealer Services revenues
increased 9.0% on a year-over-year basis to $463.6 million.
Interest on funds held for clients declined 16% year over year
to $100.5 million. The decline was primarily due to a 50 basis
points (bps) drop in the average interest yield to 2.0%, which
was partially offset by a 6% increase in average client funds
balances to $20.4 billion.
Total expenses in the reported quarter increased 9.2% year
over year to $2.47 billion, attributable to higher operating
expenses (up 6.9% year over year), selling, general &
administrative expense (up 8.1% year over year) and systems
development & programming costs (up 12.9% year over
ADP reported adjusted pre-tax earnings of $407.5 million from
continuing operations, up 4% from the year-ago quarter. Adjusted
net earnings from continuing operations increased 5% from the
year-ago quarter and came in at $269.7 million.
ADP exited the quarter with cash and cash equivalents of $1.73
billion compared with $1.68 billion in the previous quarter.
Long-term debt was $14.7 million versus $15.3 million in the
ADP expects its fiscal 2014 revenues to grow 7.0% on a
year-over-year basis. Earnings growth is projected in the range
of 8% to 10%.
Employer Services revenues are expected to grow approximately
7% with a pre-tax margin expansion of approximately 50 bps to 100
bps. PEO Services revenues are expected to improve by 10.0% to
12.0%. Pre-tax margin is expected to grow slightly on a
ADP expects Dealer Services revenues to increase by 8.0% with
a pre-tax margin expansion of approximately 100 bps. The company
expects interest on funds held for clients to decline by 10.0% to
12.0% year over year.
The company is expected to perform better on the back of
improved execution and higher client retention. Moreover,
recovery in the job market will help the company. However,
volatile macro economic environment and increasing competition
) are the near-term headwinds.
Currently, ADP has a Zacks Rank #3 (Hold).
AUTOMATIC DATA (ADP): Free Stock Analysis
EQUIFAX INC (EFX): Free Stock Analysis Report
INSPERITY INC (NSP): Free Stock Analysis
PAYCHEX INC (PAYX): Free Stock Analysis
To read this article on Zacks.com click here.