Consumer spending may be on the rise, but American payrolls are still shrinking. That's bad news for payroll processing giant Automatic Data Processing
In a glum fourth-quarter report, ADP CEO Gary Butler saw his own shadow and retreated for a long, cold winter. Here's a selection of Mr. Butler's finest prognostications:
- Revenues are expected to remain under pressure near-term.
- As anticipated, the number of employees on clients' payrolls in the United States declined 5.7% for the fourth quarter.
- Butler anticipates a challenging year ahead as a result of the difficult economic landscape.
- The company’s fiscal 2010 forecasts anticipate that severely negative economic conditions continue.
Ouch. That's a markedly different tune from the cheery melodies they're singing in Silicon Valley. Everyone from Intel
But retail spending does not bring back all of those lost jobs, and a shrinking American payroll means less money for ADP and rivals like Paychex
However, ADP still has a strong balance sheet with $2.4 billion in liquid assets, and is buying back shares to juice shareholder returns. Earnings per share jumped 7% to $0.45 per share on a smaller share count.
So this winter may be cold and gray, but it's not gonna last you for the rest of your life. ADP is struggling today but will bounce back when big customers start hiring again. Will you buy ADP while it's suffering? The rewards could be stunning when the turnaround comes.
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Apple is a Motley Fool Stock Advisor recommendation. Administaff, Intel, and Paychex are Motley Fool Inside Value selections. Automatic Data Processing and Paychex are Motley Fool Income Investor recommendations. Atheros Communications is a Motley Fool Hidden Gems pick. The Fool owns shares of Atheros Communications and Intel. Try any of our Foolish newsletters today, free for 30 days.
Fool contributor Anders Bylund holds no position in any of the companies discussed here, despite all of their Foolish accolades. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.