Automatic Data Processing (ADP) Third Quarter Earnings Beat, ’22 View Up
Automatic Data Processing, Inc. ADP reported better-than-expected third-quarter fiscal 2022 results.
Adjusted earnings per share of $2.21 beat Zacks’ consensus estimate of 6.8% and rose 16.9% year-over-year. Total revenue of $4.51 billion exceeded the consensus mark by 1.2% and improved 10% year-over-year on a reported basis and 11% on an organic basis at constant exchange rates.
Over the past year, ADP shares have gained 19.1% against a 17.4% growth in the industry it belongs to a 2.5% increase in the Zacks S&P 500 composite.
Image source: Zacks Investment Research
Let’s see the numbers in detail:
Segments in detail
Employer Services revenue of $3 billion increased 8% on a reported basis and 9% on an organic basis at constant currencies. Payments per check increased 7% year over year.
PEO services revenue increased 14% year-over-year to $1.51 billion. The average number of construction workers paid by PEO Services was 688,000, up 16% year-over-year.
Interest on funds held for clients increased 10% to $118 million. The company’s average customer fund balance increased 15% to $38.1 billion. The average yield on interest on client funds fell 10 basis points to 1.2%.
Adjusted EBIT increased 12% year over year to $1.2 billion. The adjusted EBIT margin increased by 50 basis points to 26.8%. The increase was supported by higher revenues, which were partially offset by the effect of higher sales, implementation and service expenses, and higher PEO transfer expenses .
The Employer Services segment margin increased by 120 basis points. The margin of the PEO Services segment remained stable.
Automatic Data Processing, Inc. price-consensus-eps-surprise-chart | Automatic Data Processing, Inc. Quote
Balance sheet and cash flow
ADP ended the third quarter of fiscal 2022 with cash and cash equivalents of $1.63 billion, compared to $1.75 billion in the prior quarter. Long-term debt of $2.99 billion was flat sequentially.
The company generated $971 million in cash from operating activities during the quarter. Capital expenditures amounted to $51 million. The company paid dividends worth $437.7 million and repurchased shares worth $491.4 million.
Outlook for fiscal year 2022
ADP has raised its outlook for fiscal 2022. The company now expects revenue to grow 9-10% from the previous forecast growth rate of 8-9%. Adjusted EPS is now expected to grow 15-17% versus the previous forecast growth rate of 12-14%.
The company now expects Employer Services revenue to grow at a rate of approximately 7% from the previous forecast growth rate of approximately 6% and PEO Services revenue to grow at a rate of 14%. 15% compared to the previous forecast growth rate of 13%. % to 15%.
Currently, ADP carries a Zacks Rank #2 (Buy). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of other business services companies
Omnicom Group OMC released impressive results for the first quarter of 2022, in which the company’s earnings and revenue beat the Zacks consensus estimate.
Omnicom’s earnings of $1.39 per share beat the consensus mark of 8.6% and rose 4.5% year-over-year, driven by strong margin performance.
Omnicom’s total revenue of $3.4 billion beat the consensus estimate of 5.4%, but was down slightly year-over-year.
Equifax EFX announced better than expected first quarter 2022 results.
Equifax’s adjusted earnings of $2.22 per share beat Zacks’ consensus estimate of 3.3% and improved 13% year-over-year. The reported figure exceeded the indicative range of $2.08 to $2.18.
Equifax’s revenue of $1.36 billion beat the consensus estimate of 2.4% and improved 12.4% year-over-year on a reported basis and 13% on a reported basis. local currency basis. The reported figure exceeded the indicative range of $1.32 billion to $1.34 billion.
Waste Management WM reported strong first-quarter 2022 results, in which the company’s earnings and revenue beat Zacks’ consensus estimate.
Waste Management’s adjusted earnings per share of $1.29 beat Zacks’ consensus estimate of 15.2% and improved 21.7% year-over-year.
Waste Management’s total revenue of $4.66 billion beat the consensus estimate of 4.6% and was up 13.4% year-over-year.
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