Automatic Data to Report Q4 Earnings: What's in Store?

Automatic Data Processing, Inc. ADP is scheduled to release its fourth-quarter fiscal 2024 results on Jul 31, before market open.

ADP has an impressive earnings surprise history, surpassing the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 2.9%.

Q4 Expectations

The Zacks Consensus Estimate for the top line is pegged at $4.7 billion, indicating a 5.7% increase on a year-over-year basis.Revenue growth is likely to have been driven by a rise in new bookings, an increase in retirement services offerings and higher average client funds balances.

Our estimate for fourth-quarter fiscal 2024 revenues from Employer Service is pegged at $3.2 billion, indicating 6.2% growth from the year-ago quarter's actual. The rise in new bookings and strong growth in retirement services offerings are anticipated to have benefited this segment's revenues. We estimate PEO services revenues to be $1.5 billion, implying a 3.6% year-over-year rise.

Our estimate for Interest on Funds held for clients is pegged at $257.9 million, indicating 9.4% growth from the year-ago reported figure. It is likely to have gained from higher average client funds balances and marginally better average yield. Our estimate for Average Paid PEO Worksite Employees for the quarter is pegged at 740. Changes in Pay per control are expected to be 2% for the to-be-reported quarter.

The consensus estimate for earnings per share is pegged at $2.1, indicating a year-over-year increase of 9.5%. A strong revenue performance is expected to have improved the bottom line.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for ADP this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.

ADP has an Earnings ESP of -0.47% and a Zacks Rank #2.

Stocks to Consider

Here are a few stocks from the broader Business Services sector, which, according to our model, have the right combination of elements to beat on earnings this season.

S&P Global SPGI: The Zacks Consensus Estimate for the company's second-quarter revenues is pegged at $3.4 billion, indicating a year-over-year increase of 10.7%. For earnings, the consensus mark is pegged at $3.6 per share, suggesting 16.4% growth from that reported in the year-ago quarter. The company beat the Zacks Consensus Estimate in two of the past four quarters, missed in one, and met in one, with an average surprise of 3.4%.

SPGI currently has an Earnings ESP of +1.14% and a Zacks Rank #2. The company is scheduled to declare its second-quarter results on Jul 30.

Mastercard MA: The Zacks Consensus Estimate for the company's second-quarter revenues is pegged at $6.9 billion, indicating year-over-year growth of 9.3%. For earnings, the consensus mark is pegged at $3.5 per share, implying 21.5% growth from the year-ago quarter's actual. The company beat the Zacks Consensus Estimate in the past four quarters, the average surprise being 3.4%.

MA currently has an Earnings ESP of +0.36% and a Zacks Rank #3. The company is scheduled to declare its second-quarter results on Jul 31.

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