ADP Clocks 26th Consecutive EPS Beat In Q2, Reiterates Financial Growth Outlook

Automatic Data Processing, Inc’s ADP shares are trading higher after the company’s second-quarter revenues of $4.67 billion beat the analyst consensus of $4.66 billion. Revenues increased 6% Y/Y.

The company reported quarterly adjusted EPS of $2.13, beating the analyst consensus of $2.10.

Adjusted EBIT increased 7% to $1.1 billion, and adjusted EBIT margin increased twenty basis points to 24.6%.

Net earnings increased 8% Y/Y to $878.4 million, and adjusted net earnings increased 8% Y/Y to $880.5 million. 

ADP exited the quarter with cash and equivalents worth $1.64 billion. 

CEO Maria Black said, “We are focused on providing exceptional HCM products and outstanding service, and these efforts continued to drive client satisfaction to new heights. We look forward to strengthening our existing client partnerships and to building new ones as we invest in our technology and people.”

Outlook: For FY24, the company reiterated revenue growth outlook of 6% – 7% or $19.09 billion – $19.27 billion versus $19.14 billion consensus and adjusted diluted EPS growth of 10% – 12% or $9.05 – $9.22 versus $9.12 consensus.

In FY24, the company reiterated Employer Services revenue growth of 7% -8 % and PEO Services revenue growth of 3%-4%.

Price Action: ADP shares are trading higher by 3.37% to $246.64 on the last check Wednesday.

ADP’s Stock Prediction For 2024

When buying a stock for a longer time horizon, it is important for investors to assess where they think the stock is headed in the future.

When mapping a stock's future trajectory, investors should consider factors including the future earnings expectations and expected performance against a benchmark.

Automatic Data Processing’s revenue has grown at an average rate of 6.44% annually over the past 5 years. The average 1-year price target from analysts is $242.67, representing an expected -1.31% downside in 2025.

While past performance is not a guarantee of future results, investors should also look at a stock's historical performance when compared to both a benchmark index and the company's peers. Shares of Automatic Data Processing have seen an annualized return of 15.06%, outperforming the S&P500 index by 5.78%. This compares to 11.85% growth in the overall Industrials sector. Automatic Data Processing has a beta of 0.91.

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