雅虎香港財經 Why Is ADP (ADP) Down 0.5% Since Last Earnings Report?
A month has gone by since the last earnings report for Automatic Data Processing (ADP). Shares have lost about 0.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is ADP due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
ADP's Q3 Earnings Beat Estimates
Automatic Data Processing, Inc. has reported impressive third-quarter fiscal 2024 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.
ADP’s earnings per share of $2.9 beat the consensus estimate by 4.4% and increased 14.3% from the year-ago quarter. Total revenues of $5.3 billion beat the consensus estimate by a slight margin and grew 6.6% from the year-ago quarter on a reported basis and 6% on an organic constant-currency basis.
Segments
Employer Services’ revenues of $3.6 billion increased 8% on a reported basis and 7% at constant currency, meeting our estimate. Pays per control increased 2% from the year-ago quarter.
PEO Services’ revenues rose 5% from the year-ago quarter to $1.7 billion and beat our estimate of $1.6 billion for fourth-quarter fiscal 2023. Average worksite employees paid by PEO Services were 732,000, up 3% from the year-ago quarter.
Interest on funds held for clients grew 29% from the year-ago quarter to $321 million and beat our estimate of $255.8 million. ADP’s average client funds balance increased 6% to $41.7 billion. Average interest yield on client funds expanded 50 basis points to 3.1%.
Margins
Adjusted EBIT increased 12% from the year-ago quarter to $1.5 billion. The adjusted EBIT margin grew 140 basis points (bps) to 29.3%.
The margin of Employer Services increased 230 bps, while PEO Services decreased 220 bps.
Balance Sheet and Cash Flow
ADP exited third-quarter fiscal 2024 with cash and cash equivalents of $3.3 billion compared with $1.6 billion in fourth-quarter fiscal 2023. The long-term debt of $3 billion was flat with the preceding quarter’s figure.
Automatic Data Processing generated $1.5 billion in cash from operating activities in the quarter. Capital expenditure amounted to $1.9 million.
2024 Guidance
For 2024, ADP expects 6-7% revenue growth. Adjusted EPS is anticipated to register 10-12% growth. The adjusted effective tax rate is estimated to be 23%. The adjusted EBIT margin is expected to grow 60-70 bps.
Automatic Data Processing expects Employer Services revenues to grow 7-8%, whereas PEO Services revenues are expected to rise 3-4%.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, ADP has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, ADP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report
