(Adds details from CFO, updates share price)
DOW JONES NEWSWIRES
Automatic Data Processing Inc.'s (ADP) fiscal fourth-quarter
earnings fell 41% absent a prior-year tax benefit as the
payroll-processing and human-resources outsourcing company saw
employees on clients' payrolls edge up and revenue increase.
Shares were down 1.3% to $41.52 in recent trading as the company
projected earnings growth for the new year of 1% to 3% on revenue
growth of 1% to 3%. Analysts had forecast increases of 5% and 4%,
respectively, according to Thomson Reuters. Amid the factors
weighing on the forecast is the euro's ongoing volatility.
Nonetheless, President and Chief Executive Gary C. Butler said,
"I am pleased that the trends in our key business metrics turned
positive as we exited the year."
Chief Financial Officer Chris Reidy added in an interview with
Dow Jones Newswires that ADP saw an inflection point for most of
its metrics during the quarter as it continues to prepare for
future growth.
In another sign of stabilization, client funds that are being
processed were up 9% in the quarter from a year earlier, though it
was more than offset by falling interest rates. Fund balances are
expected to rise 2% to 3% in the new year, while rates are expected
to ease further.
Declines in the number of workers on clients' payrolls have
moderated, with some job growth beginning to surface. Still,
unemployment remains high. As the economy recovers, the big driver
for ADP will be generating new revenue growth, with
salesforce-expansion plans among the ways to do so.
For the quarter ended June 30, ADP reported a profit of $207.9
million, or 42 cents a share, down from $352.8 million, or 70
cents, a year earlier. The prior year included a $120 million tax
benefit. Revenue increased 4.4% to $2.2 billion.
Analysts most recently forecast earnings of 42 cents on revenue
of $2.14 billion.
Revenue at ADP's employer-services segment, by far its largest,
grew 4%. In the U.S., revenue rose slightly and employees on
clients' payrolls were up 0.3%.
Pays-per-control rose 0.3% in the quarter. ADP projects flat to
0.5% growth for the new year. A one point change amounts to roughly
$20 million a year in revenue.
Customer retention improved 1.6 percentage points in the quarter
to end the year at about 90%, an improvement over declines in the
past two years.
Combined new business sold in its employer-services and
human-resources benefits outsourcing businesses rose 25%.
The increase, thanks to double-digit increases at its national
accounts, where it saw the easiest comparisons, and new products
for small and midsize business, also was the first quarterly rise
since 2008.
Its smaller human-resources outsourcing segment, which also
provides recruiting, posted revenue growth of 13% as employees on
clients' payrolls rose 8.5%.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481;
Tess.Stynes@dowjones.com