Automatic Data Processing, Inc.
) is set to report third quarter fiscal 2014 results on Apr 30.
Last quarter, it posted a 1.30% positive surprise. We note that
ADP has outperformed the Zacks Consensus Estimate in the
preceding four quarters with an average positive surprise of
Let's see how things are shaping up for this announcement.
Growth Factors this Past Quarter
ADP 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.
Moreover, the 100% tax-free spin-off of its Dealer Services
business into an independent publicly traded company will help
ADP to focus more on its core Human Capital Management (HCM)
business, going forward. This spin-off will provide nearabout
$700.0 million, which the company would use up in share buybacks.
This aggressive share buyback will boost profitability going
However, volatile macroeconomic environment and increasing
) are the near-term headwinds.
Our proven model does not conclusively show that ADP is likely to
beat earnings this quarter. That is because a stock needs to have
both a positive
and a Zacks Rank of #1, 2 or 3 for this to happen. That is not
the case here as you will see below.
That is because the Most Accurate estimate stands at $1.08 which
coincides with the Zacks Consensus Estimate. Hence, the
difference is of 0.0%.
Zacks Rank #3 (Hold):
ADP's Zacks Rank #3 when combined with a 0.00% ESP makes surprise
We caution against stocks with Zacks Ranks #4 and #5 (Sell rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions momentum.
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