Please ensure Javascript is enabled for purposes of website accessibility

Automatic Data Processing Manages a Solid Beat and Raise

By Steve Symington – Updated Nov 5, 2018 at 6:19PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The HR management software specialist kicked off its fiscal year on a high note. Here's what investors need to know.

Automatic Data Processing (ADP -0.69%) announced impressive fiscal first-quarter 2019 results late last week, detailing strong new business bookings and the early fruits of its restructuring and cost-savings initiatives. The HR management software leader also raised its full-year guidance to reflect its relative outperformance over the past few months. 

With shares up around 5% in response, let's take a closer look at what drove ADP in its strong start to the new fiscal year.

ADP red text logo

IMAGE SOURCE: AUTOMATIC DATA PROCESSING.

Automatic Data Processing results: The raw numbers

Metric

Fiscal Q1 2019*

Fiscal Q1 2018

Growth (YOY)

Revenue

$3.323 billion

$3.077 billion

8%

GAAP net income

$505.4 million

$412.6 million

22.5%

GAAP earnings per share (diluted)

$1.15

$0.93

23.7%

DATA SOURCE: AUTOMATIC DATA PROCESSING. *FOR THE QUARTER ENDED SEPTEMBER 30, 2018. YOY = year over year. 

What happened with ADP this quarter?

  • Organic revenue grew 7% on a constant-currency basis.
  • Adjusted to exclude one-time items such as transformation expenses, ADP's non-GAAP earnings were $528.8 million, or $1.20 per diluted share. That's $0.09 per share above most estimates, and up nearly 28% from $0.94 per share in the same year-ago period.
  • Employer Services new business bookings grew 8% year over year.
  • Employer Services revenue increased 7% (or 6% on an organic constant-currency basis) to $2.338 billion.
  • PEO Services revenue grew 10% year over year to $987.8 million.
  • Average worksite employees paid by PEO services grew to 528,000, up 9% year over year and from 523,000 last quarter.
  • Average client funds balances grew 5% to $22.2 billion, and interest on funds held for clients grew 19% to $119 million.

What management had to say

"We are pleased with our strong start to the fiscal year and with the continued momentum by our sales force as it delivered another solid quarter of New Business Bookings growth," stated ADP CEO Carlos Rodriguez. "We also continue to execute well on our transformation initiatives, and remain focused on enhancing our product, service, and operations to maximize value for our clients and shareholders alike."

"We continue to see clear positive results from the investments we have made in recent years," added ADP CFO Jan Siegmund. "Our Service Alignment Initiative, client migrations, and transformation initiatives are yielding improvements in our client satisfaction scores and gains in productivity, keeping us firmly on a path of
delivering balanced revenue and profit growth over the long term."

Looking ahead

As such, ADP raised its full fiscal-year 2019 guidance to call for revenue growth of 6% to 7% (up from 5% to 7% previously), and growth in adjusted earnings of 15% to 17% from $4.53 in fiscal 2018 (up from 13% to 15% before).

Bottom line: There were no enormous surprises from Automatic Data Processing this quarter. But given its modest beat and raise to kick off the new fiscal year, it's equally unsurprising to see ADP stock up nearly 30% over the past year and hovering near an all-time high as of this writing.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Automatic Data Processing, Inc. Stock Quote
Automatic Data Processing, Inc.
ADP
$226.19 (-0.69%) $-1.56

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.