Automatic Data Processing Earnings: Profit Rises, Revenue Off Target

S&P 500 (NYSE:SPY) component Automatic Data Processing Inc. (NASDAQ:ADP) reported its results for the fourth quarter. Automatic Data Processing offers human resource, payroll, tax, and benefits administration solutions to a wide range of clients.

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Automatic Data Processing Inc. Earnings Cheat Sheet

Results: Net income for Automatic Data Processing Inc. rose to $258.4 million (53 cents per share) vs. $241.8 million (49 cents per share) in the same quarter a year earlier. This marks a rise of 6.9% from the year-earlier quarter.

Revenue: Rose 5.2% to $2.64 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Automatic Data Processing Inc. fell in line with the mean analyst estimate of 53 cents per share. It fell short of the average revenue estimate of $2.92 billion.

Quoting Management: Commenting on the results, Mr. Rodriguez said, “I am pleased with ADP’s results. Our sales execution in Employer Services and PEO Services was strong in the fourth quarter with robust new business sales growth of 20%. For the year, we achieved new business sales growth of 13%, which was also above our expectations. New business sales represent annualized recurring revenues anticipated from new orders. Dealer Services performed well as the North American automotive marketplace showed continued strengthening. We are driving good pretax margins in all of our business segments, and excluding the drag from acquisitions, pretax margins improved in each business segment. ADP’s total pretax margin, however, continued to be negatively impacted by the decline in high-margin client interest revenues resulting from lower market interest rates.

Key Stats:

The company has now seen its net income rise for three quarters in a row. In the third quarter, net income rose 6.7% and in the second quarter, the figure rose 20.9%.

The company met estimates last quarter after topping forecasts in the previous quarter with net income of 92 cents versus a mean estimate of net income of 91 cents per share.

Looking Forward: Over the past ninety days, the average estimate for the first quarter of the next fiscal year has fallen from 66 cents per share to 65 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. The average estimate for the fiscal year has remained at $2.74 per share.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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