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Automatic Data Processing (ADP) Q4 Earnings, Revenues Beat

Automatic Data Processing, Inc.ADP reported better-than-expected fourth-quarter fiscal 2020 results.

Adjusted earnings per share of $1.14 beat the Zacks Consensus Estimate by 18.8% and remained flat year over year. Total revenues of $3.38 billion beat the consensus mark by 2.6% but declined 3% year over year on a reported basis and 2% on an organic constant-currency basis.

So far this year, shares of ADP have lost 14% compared with 13.1% decline of the industry. In contrast, the Zacks S&P 500 composite has risen 0.7% in the said time frame.

 

Let’s check out the numbers in detail.

Segments in Detail

Employer Services revenues of $2.29 billion decreased 6% year over year on a reported basis and 5% on organic constant-currency basis. Pays per control decreased 10.8% year over year. New business bookings decreased 67%.

PEO Services revenues were up 4% year over year to $1.08 billion. Average worksite employees paid by PEO Services were 548,000, down 3% from the prior-year quarter.

Interest on funds held for clients decreased 22% to $114.8 million. The company’s average client funds balances decreased 8% year over year to $24 billion. Average interest yield on client funds declined 30 basis points to 1.9%

Margins

Adjusted EBIT decreased 2% year over year to $653 million. Adjusted EBIT margin grew 10 basis points from the year-ago quarter to 19.3%, backed by prudent expense management and cost savings related to transformation initiatives, which were partially offset by a decline in revenues combined with ADP's continued investment in sales, services and products.

Automatic Data Processing, Inc. Price, Consensus and EPS Surprise

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 fourth-quarter fiscal 2020 with cash and cash equivalents of $1.91 billion compared with $1.71 billion in the prior quarter. Long-term debt of $1 billion was flat year over year.

The company generated $776.6 million of cash from operating activities in the quarter. Capital expenditures were $33.4 million. The company paid out dividends worth $391.6 million and did not repurchase any shares.

Fiscal 2021 Outlook

ADP expects revenues to decline at a rate of 1-4%. Adjusted earnings per share are anticipated to decline at a rate of 13-18%. The company expects adjusted EBIT margin to be down 300 basis points. Adjusted effective tax rate is anticipated to be 23.1%.

Currently, ADP carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Business Services Companies

Equifax EFX reported better-than-expected second-quarter 2020 adjusted earnings of $1.60 per share, whichbeat the Zacks Consensus Estimate by 22.1% and improved 14.3% on a year-over-year basis. The reported figure exceeded the guided range of 78-88 cents.

IQVIA Holdings IQV reported second-quarter 2020 adjusted earnings per share of $1.18, which beat the consensus mark by 12.4% but decreased 22.9% on a year-over-year basis. The reported figure exceeded the guided range of $1.00-$1.09.

Robert Half RHI reported second-quarter 2020 earnings of 41 cents per share beat the consensus mark by 17% but were down 58% year over year.

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