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Bank of England expected to hold interest rates

Investors predict MPC will maintain interest at 5.25% when it meets on Thursday.

Automatic Data Processing (ADP) Q3 Earnings Match Estimates

Zacks Equity Research
·4-min read

Automatic Data Processing, Inc.ADP third-quarter fiscal 2020 earnings came in line with the Zacks Consensus Estimate while revenues surpassed the same.

Adjusted earnings per share of $1.92 improved 8.5% year over year. Total revenues of $4.04 billion beat the consensus mark by 0.2% and improved 6% year over year on a reported basis as well as on an organic constant-currency basis.

So far this year, shares of ADP have lost 16.2% compared with an 18.3% decline of the industry and 10.8% decline of the Zacks S&P 500 composite.

 

Let’s check out the numbers in detail.

Segments in Detail

Employer Services revenues of $2.81 billion increased 3% year over year on a reported basis and 4% on organic constant-currency basis. Pays per control rose 1.9% year over year. New business bookings decreased 9%.

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PEO Services revenues were up 11% year over year to $1.24 billion. Average worksite employees paid by PEO Services were 595,000, up 7% from the prior-year quarter.

Interest on funds held for clients decreased 5% to $159 million. The company’s average client funds balances climbed 4% year over year to $31.3 billion. Average interest yield on client funds declined 20 basis points to 2%

Margins

Adjusted EBIT came in at $1.09 billion, up 8% on a year-over-year basis. Adjusted EBIT margin rose 60 basis points from the year-ago quarter to 27.1%. Adjusted EBIT margin benefited from continued execution of transformation initiatives and operating efficiencies, which were partially offset by the cost of a one-time global associate assistance payment related to COVID-19 and incremental amortization and PEO pass-through expenses.

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

 

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 third-quarter fiscal 2020 with cash and cash equivalents of $1.71 billion compared with $1.5 billion in the prior quarter. Long-term debt of $1 billion was flat year over year.

The company generated $1.12 billion of cash from operating activities in the quarter. Capital expenditures were $38.6 million. The company paid out dividends worth $392.9 million and repurchased shares worth $391.2 million.

Fiscal 2020 Outlook

ADP expects revenues to register about 3% growth compared with the prior growth rate of 6%. Adjusted earnings per share are anticipated to register 4-7% growth compared with the prior growth rate of 12-14%. The company expects adjusted EBIT margin to be down 25 to up 25 basis points compared to the prior growth guidance of 100-125 basis points. Adjusted effective tax rate is anticipated to be 22.9% compared with the prior rate of 23.2%.

Currently, ADP carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Business Services Companies

The Interpublic Group of Companies, Inc. IPG reported first-quarter 2020 adjusted earnings of 11 cents per share, which beat the consensus mark by 22.2% but remained flat on a year-over-year basis.

Equifax Inc. EFX reported first-quarter 2020 adjusted earnings of $1.40 per share, which beat the consensus mark by 8.5% and improved 16% on a year-over-year basis.

ManpowerGroup Inc. MAN reported first-quarter 2020 adjusted earnings of 71 cents per share, which missed the Zacks Consensus Estimate by 2.7% and slumped 48.9% year over year.

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Equifax, Inc. (EFX) : Free Stock Analysis Report
 
ManpowerGroup Inc. (MAN) : Free Stock Analysis Report
 
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Interpublic Group of Companies, Inc. (The) (IPG) : Free Stock Analysis Report
 
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Zacks Investment Research