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What Awaits Automatic Data Processing (ADP) in Q1 Earnings?

Zacks Equity Research

Automatic Data Processing, Inc. ADP is scheduled to report first-quarter fiscal 2020 results on Oct 30, before market open.

So far this year, shares of ADP have gained 23.6% compared with 24.3% growth of the industry it belongs to and 19.4% increase of the Zacks S&P 500 composite.

 

Let’s check out how things are shaping up for the announcement.

Top Line Likely to Improve Year Over Year

Contribution from acquisitions, continued strong retention and new business started from Employer Services New Business Bookings are likely to have partially offset the unfavorable impact from foreign currency movements. This is expected to get reflected in ADP’s first-quarter fiscal 2020 revenues, the Zacks Consensus Estimate for which stands at $3.51 billion, indicating growth of 5.6% from the year-ago quarter reported figure. In fourth-quarter fiscal 2019, total revenues of $3.49 billion increased 6% year over year.

Going by segments, the consensus mark for Employer Services segment revenues stands at $2.46 billion, indicating an increase of 5.4% from the year-ago period reported figure. Contributions from new business started from New Business Bookings, solid retention, acquisitions and interest earned on funds held for clients are likely to have partially offset the unfavorable impact from foreign currency movements.

The consensus estimate for PEO Services revenues is pegged at $1.08 billion, indicating year-over-year growth of 9.3%. The segment is likely to have been driven by increase in the average number of worksite employees.

Automatic Data Processing, Inc. Revenue (TTM)

 

Automatic Data Processing, Inc. Revenue (TTM)

Automatic Data Processing, Inc. revenue-ttm | Automatic Data Processing, Inc. Quote

Bottom Line Likely to Increase

Continued strength in margin performance, lower adjusted effective tax rate and fewer shares outstanding are likely to have boosted ADP’s bottom line. The Zacks Consensus Estimate for earnings per share is pegged at $1.33, indicating growth of 10.8% year over year. In fourth-quarter fiscal 2019, adjusted earnings per share of $1.14 increased 15% year over year.

What Our Model Says

Our proven Zacks model does not conclusively predict an earnings beat for ADP this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

ADP has an Earnings ESP of -0.59% and a Zacks Rank #3.

Automatic Data Processing, Inc. Price and EPS Surprise

 

Automatic Data Processing, Inc. Price and EPS Surprise

Automatic Data Processing, Inc. price-eps-surprise | Automatic Data Processing, Inc. Quote

Stocks to Consider

Here are a few stocks from the broader Zacks Business Services sector that investors may consider as our model shows that these have the right combination of elements to beat on third-quarter 2019 earnings:

Verisk VRSK has an Earnings ESP of +2.22% and a Zacks Rank #3. The company is slated to report results on Oct 29. You can see the complete list of today’s Zacks #1 Rank stocks here.

WEX Inc. WEX has an Earnings ESP of +1.24% and a Zacks Rank #3. The company is slated to report results on Oct 31.

Fidelity National Information Services, Inc. FIS has an Earnings ESP of +0.13% and a Zacks Rank #3. The company is slated to release results on Nov 5.

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Verisk Analytics, Inc. (VRSK) : Free Stock Analysis Report
 
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