The country's largest payroll services company doesn't seem to have missed a beat. Automatic Data Processing
For the quarter, ADP saw its revenue increase 14% to $2.2 billion, while net earnings from continuing operations rose 15.8% to $364 million. Diluted earnings per share from continuing operations increased by a more impressive 20%, because ADP's average shares outstanding shrank 4.1% year over year. So far during 2007, the company has spent $945 million to buy back 20.1 million shares, paying about $47 a share on average.
We're looking at the company from a continuing operations perspective, instead of its entire cash performance, because of the spinoff of ADP's brokerage services group, Broadridge Financial Solutions
ADP generates approximately 85% of its revenues from its employer services business, which focuses primarily on payroll and HR. This portion of the business revenue increased by 12%, with revenue for services other than payroll increasing 23%. That's about on par with Paychex's recent growth as well. During the quarter, the company saw its clients increase their employees on payroll by 3%. Along with employee pay increases, that's an important factor in ADP's performance. From a competitive standpoint, this part of ADP lines up against Paychex
Revenue growth for ADP will likely be closer to 10% in the long term, but the company has room to increase its margins, and it's valued very reasonably, given its cash flows. Throw in the ample cash on the balance sheet, and recurring cash flow to continue repurchasing its currently cheap shares, and you've got a recipe for a very attractive long-term return.