In This Article:
Automatic Data Processing, Inc. ADP has reported impressive second-quarter fiscal 2025 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate.
See Zacks Earnings Calendar to stay ahead of market-making news.
ADP’s earnings per share of $2.4 beat the consensus estimate by 3.5% and increased 10.3% from the year-ago quarter. Total revenues of $5 billion surpassed the consensus estimate by 1.6% and grew 8.2% on a year-over-year basis.
The ADP stock has gained 17.3% in the past six months, underperforming the 17.8% rally of its industry while outperforming the 13% rise of the Zacks S&P 500 Composite.
Six-Month Price Performance
Image Source: Zacks Investment Research
ADP’s Segmental Results
Employer Services’ revenues of $3.4 billion increased 8% on a reported basis and 7% at constant currency, meeting our estimate. Pays per control increased 1% from the year-ago quarter.
PEO Services’ revenues gained 8% from the year-ago quarter to $1.7 billion and missed our projection of $1.6 billion for the second quarter of fiscal 2025. Average worksite employees paid by PEO Services were 746,000, rising 3% from the year-ago quarter.
Interest on funds held for clients grew 21% from the year-ago quarter to $273 million and outpaced our estimate of $272.3 million. ADP’s average client funds balance rose 8% to $35.3 billion. The average interest yield on client funds expanded 30 basis points to 3.1%.
Automatic Data Processing’s Margins
Adjusted EBIT increased 11% on a year-over-year basis to $1.3 billion. The adjusted EBIT margin rose 60 basis points (bps) to 25.2%.
The margin of Employer Services increased 90 bps, while PEO Services decreased 140 bps.
Balance Sheet & Cash Flow of ADP
Automatic Data Processing exited second-quarter fiscal 2025 with cash and cash equivalents of $2.2 billion compared with $2.1 billion at the end of the preceding quarter. The long-term debt of $3 billion was flat with the preceding quarter.
The company generated $1.2 billion in cash from operating activities in the quarter.
Automatic Data Processing’s FY25 Outlook
For fiscal 2025, ADP expects revenue growth of 6-7%. Adjusted EPS growth is anticipated to be 7-9%. The adjusted effective tax rate is estimated to be 23%. The guidance for adjusted EBIT margin is expected to be 30-50 bps.
Automatic Data Processing expects Employer Services’ revenue to grow 6-7%. The guidance for PEO Services’ revenue growth is at 5-6%.
ADP carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.