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Automatic Data Processing (ADP) Q2 Earnings: What's Up?

Automatic Data Processing Inc.ADP is set to release second-quarter fiscal 2017 earnings on Feb 1. In the last quarter, the company reported a positive earnings surprise of 11.69%. Further, we note that the company delivered positive earnings surprises in three of the last four quarters, with an average surprise of 3.81%.

Notably, shares of ADP have outperformed the Zacks Outsourcing industry in the last one year. While the industry returned 19.1%, the stock gained 22.6%.

Let's see how things are shaping up for this announcement.

Factors to Consider

ADP holds a dominant position in the payroll processing and human capital management market (HCM), primarily owing to its robust product portfolio. We believe that the company's higher revenue per client and a decent customer retention ratio place it in an advantageous position.

However, we expect the company's investments in new initiatives to weigh on its upcoming quarterly earnings. Additionally, uncertainty surrounding IT spending, impact of Affordable Care Act (ACA) reversal and strengthening U.S. dollar are some concerns. Moreover, increasing competition from the likes of Paychex, Equifax Inc. EFX , Insperity, Inc. and TriNet Group are the other factors likely to affect earnings this season.

Earnings Whispers?

Our proven model does not conclusively show that ADP is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP : ADP's Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 81 cents per share. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : ADP carries a Zacks Rank #2, which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Automatic Data Processing, Inc. Price and EPS Surprise

Automatic Data Processing, Inc. Price and EPS Surprise | Automatic Data Processing, Inc. Quote

Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Applied Optoelectronics AAOI with an Earnings ESP of +15.87% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Pure Storage PSTG with an Earnings ESP of +4.17% and a Zacks Rank #2.

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Equifax, Inc. (EFX): Free Stock Analysis Report

Applied Optoelectronics, Inc. (AAOI): Free Stock Analysis Report

Automatic Data Processing, Inc. (ADP): Free Stock Analysis Report

Pure Storage, Inc. (PSTG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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