Automatic Data Processing (ADP) Q2 Earnings Beat, ’22 View Up

Automatic Data Processing, Inc.ADP reported better-than-expected results for the second quarter of fiscal 2022.

Adjusted earnings per share of $1.65 beat Zacks’ consensus estimate of 1.2% and rose 9% year-over-year. Total revenue of $4.03 billion exceeded the consensus mark of 1.1% and improved 9% year-over-year on a reported basis as well as on an organic basis at constant currencies .

So far this year, ADP shares have gained 31.8% against growth of 26.6% industry it belongs to a 14.8% increase in the Zacks S&P 500 composite.

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Let’s see the numbers in detail:

Segments in detail

Employer Services revenue of $2.67 billion increased 6% on a reported basis and 7% on an organic basis at constant currencies. Payments per check increased 6% year over year.

PEO services revenue grew 15% year-over-year to $1.36 billion. The average number of construction workers paid by PEO Services was 660,000, up 16% year-over-year.

Interest on funds held for clients increased 1% to $106 million. The company’s average customer fund balance increased 28% to $32.2 billion. The average yield on interest on client funds fell 40 basis points to 1.3%.

Margins

Adjusted EBIT increased 10% year-over-year to $930 million. The adjusted EBIT margin increased by 20 basis points to 23.1%. The increase was supported by higher operating income, which was partially offset by the effect of higher implementation and service expenses, and higher PEO transfer expenses.

The Employer Services segment margin increased by 40 basis points. The margin of the PEO Services segment decreased by 10 basis points.

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

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

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

Balance sheet and cash flow

ADP ended the second quarter of fiscal 2022 with cash and cash equivalents of $1.75 billion, compared to $1.60 billion in the prior quarter. Long-term debt of $2.99 ​​billion was flat sequentially.

The company generated $1.09 billion in cash from operating activities during the quarter. Capital expenditures amounted to $39.9 million. The company paid dividends worth $393.8 million and repurchased shares worth $462.5 million.

Outlook for fiscal year 2022

ADP has raised its outlook for fiscal 2022. The company now expects revenue to grow 8-9% from the previously forecast growth rate of 7-8%. Adjusted EPS is now expected to grow 12-14%, versus 11-13% previously forecast.

The company now expects Employer Services revenue to grow at a rate of approximately 6% from the previously forecast growth rate of 5% to 6% and PEO Services revenue to grow at a rate of 13 to 15% compared to the forecast provided previously by 11% to 13%.

Currently, ADP carries a Zacks Rank #2 (Buy). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other versions to come

Investors Interested in Broader Zacks Business services sector can consider actions as waste connections WCN, Waste Management WM and Republic Services RSG, which will soon publish its figures for the fourth quarter of 2021.

Waste Connections will release its results on February 16. The stock has an expected earnings growth rate of 15.3% for the current year.

Shares of Waste Connections have jumped 20% in the past year. The company has long-term earnings growth of 13.6%.

Waste Management will release quarterly numbers on February 2. The stock has an expected earnings growth rate of 12.2% for the current year.

Shares of Waste Management have jumped 29.9% over the past year. The company has long-term earnings growth of 12.6%.

Republic Services will release its results on February 10. The stock has an expected earnings growth rate of 11.1% for the current year.

Shares of Republic Services have jumped 33.8% over the past year. The company is posting long-term earnings growth of 10.9%.

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