ADP's 3Q Earnings Beat By a Penny - Analyst Blog
03 Maio 2013 - 8:00AM
Zacks
Automatic Data Processing
Inc. (ADP) reported third quarter 2013 earnings from
continuing operations of 99 cents per share, beating the Zacks
Consensus Estimate by a penny. Reported earnings per share
increased 8.8% from the year-ago quarter.
Quarter
Details
Revenues increased 7% year over
year to $3.11 billion and came in line with the Zacks Consensus
Estimate. Organic growth was 6% in the quarter. The year-over-year
revenue growth was driven by strong performance of the Employer
Services, PEO Services and Dealer Services segments.
Employer Services revenues
increased 7% year over year (6% organically) to $2.21 billion. The
number of employees on clients’ payrolls in the United States grew
2.7% in the quarter on a same-store-sales basis.
PEO Services revenue increased 10%
year over year to $565.5 million in the reported quarter. Dealer
Services revenue increased 8% on a year over year basis to $460.5
million.
Interest on funds held for clients
declined 16% year over year to $112.0 million. The decline was
primarily due to a 50 basis points (bps) drop in the average
interest yield to 1.9%, which was partially offset by a 7% increase
in average client funds balances to $23.2 billion.
Total expenses in the reported
quarter increased 7.2% year over year to $2.40 billion,
attributable to higher operating expenses (up 7.7% year over year),
selling, general & administrative expense (up 5.6% year over
year) and systems development & programming costs (up 14.3%
year over year).
The company reported pre-tax
earnings from continuing operations of $724.8 million, up 6% from
the year-ago quarter. Net earnings from continuing operations
increased 7% from the year-ago quarter to $482.7 million.
The company exited the quarter with
cash and cash equivalents (including short-term marketable
securities) of $1.68 billion compared with $1.43 billion in the
previous quarter. Long-term debt was $15.3 million.
Guidance
For fiscal 2013, ADP revised its
revenue growth outlook from 5.0%-7.0% to 6%-7% on a year-over-year
basis. Earnings growth estimates were also revised from a range of
5.0%-7.0% to 6%-7%.
Employer Services revenues are
expected to grow approximately 7% with a pre-tax margin expansion
of approximately 50 bps. PEO Services revenue is forecast to
improve 12.0%. Pre-tax margin is expected to grow slightly on a
year-over-year basis. The company expects Dealer Services revenue
to increase in the 8.0%-9.0% range with a pre-tax margin expansion
in excess of 100 bps.
The company expects interest on
funds held for clients to decline 15% year over year to
approximately $420 million.
Recommendation
The company reported
better-than-expected results on the back of improved execution and
higher client retention. However, volatile macro economic
environment and increasing competition from Paychex
Inc. (PAYX), Insperity Inc. (NSP) and
Equifax Inc (EFX) are the
near-term headwinds.
Currently, ADP has a Zacks Rank #2
(Buy).
AUTOMATIC DATA (ADP): Free Stock Analysis Report
EQUIFAX INC (EFX): Free Stock Analysis Report
INSPERITY INC (NSP): Free Stock Analysis Report
PAYCHEX INC (PAYX): Free Stock Analysis Report
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