Please ensure Javascript is enabled for purposes of website accessibility

ADP Delivers Strong Bookings Growth, but Forex Continues to Take a Toll

By Joe Tenebruso - Feb 4, 2016 at 7:41PM

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 payroll-processing titan increased its full-year forecast for worldwide new business bookings, but also lowered its revenue and earnings guidance due to the direction of foreign exchange trends.

Image Source: ADP

Automatic Data Processing (ADP 2.48%) reported second-quarter fiscal 2016 results on Wednesday. The payroll and human resources company is winning new business at an impressive clip, but foreign currency fluctuations are denting its results.

ADP results: The raw numbers


Q2 2016

Q2 2015

Growth (YOY)


$2.807 billion

$2.653 billion


Net earnings

$341.4 million

$331.5 million


Earnings per share




Data source: ADP Q2 2016 earnings press release.

What happened with ADP this quarter?

  • Worldwide new business bookings grew 15%.
  • Revenue increased 6% year-over-year to $2.8 billion, and 8% on a constant-dollar basis.
  • Employer services revenue rose 3% to $2.2 billion, with the number of employees on ADP clients' payrolls in the U.S. increasing 2.5%.
  • PEO (professional employer organization) services revenue jumped 18% to $737 million, with average worksite employees paid by PEO services increasing 14% to approximately 403,000.
  • ADP's adjusted pre-tax earnings, which exclude divestiture-related gains, grew 2% to $506 million, and 4% on a constant-dollar basis. Adjusted pre-tax margins, however, declined about 70 basis points to 18%.
  • Adjusted EPS from continuing operations increased 4% to $0.72 (and 6% on a constant-dollar basis), aided by share buybacks and a lower effective tax rate.

What management had to say
"ADP's revenue growth in the quarter was solid despite continued headwinds from foreign currency translation," said CFO Jan Siegmund. "As previously communicated, ADP made additional investments in the second quarter to increase operational resources in support of our service and implementation teams. These investments were ahead of recurring revenue which is expected to contribute to ADP's growth in the second half of fiscal 2016."

Looking forward
ADP boosted its full-year 2016 bookings guidance, and now anticipates growth in worldwide new business bookings of at least 12% over $1.6 billion sold in fiscal 2015, compared to the company's prior forecast of at least 10%. 

"We continue to experience strong momentum in new business bookings, reflecting the confidence our clients have in ADP's ability to assist with their human capital management needs," said CEO Carlos Rodriguez.

However, management lowered its projections for revenue growth to 7% -- down from its earlier estimates of a 7% to 8% range -- due to expectations of a larger negative impact from foreign currency translations.

ADP also reduced its earnings outlook due to those foreign exchange headwinds, as well as higher expected selling expenses related to its increased bookings forecast. Management now expects adjusted EPS growth of 11% to 13%, down from its prior guidance for growth of 12% to 14%.

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.
$217.74 (2.48%) $5.26

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

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.