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Automatic Data Processing (ADP) 2Q Earnings Rise 4.2 Pct, Beat Estimates

 February 05, 2013 09:23 AM

(By Balaseshan) Automatic Data Processing (NASDAQ: ADP) reported a 4.2% rise in quarterly earnings on higher revenue and strong performance from its business segments. Results exceeded Street's expectations.

Earnings from continuing operations for the second quarter were $352.0 million or $0.72 per share, down from $372.8 million or $0.76 per share last year. The latest quarter included a pretax gain of $66 million, $41 million after tax, on a sale of assets. Adjusted earnings per share (EPS) from continuing operations rose to $0.72 from $0.67.

Total revenue increased 7% for the latest quarter, 6% organically, to $2.75 billion, on solid performance from its business segments.

[Related -Automatic Data Processing Inc. (ADP) Dividend Stock Analysis]

Analysts, on average, polled by Thomson Reuters had expected a profit of $0.71 per share on revenue of $2.72 billion for the second quarter.

Employer Services' revenues rose 7% for the quarter, 6% organically, compared to last year's second quarter. Professional Employer Organization (PEO) Services' revenues increased 13% for the second quarter. Dealer Services' revenues grew 11% for the quarter, 9% organically.

Interest on funds held for clients declined 14% to $101.7 million, due to a decline of about 60 basis points in the average interest yield to 2.4%, partially offset by an increase of 9% in average client funds balances to $17.0 billion.

Looking ahead into the fiscal 2013, the company still expects total revenue growth of 5% to 7% and EPS from continuing operations growth of 5% to 7%, while Street analysts predict EPS to grow 7.00% on revenue growth of 5.90%.

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For the fiscal 2013, interest on funds held for clients is now expected to decline 15% from $493.3 million in fiscal 2012 to about $420 million. Interest income on corporate funds is expected to decline about $20 million from $85.2 million in fiscal 2012.

In combination, the company expects the total impact related to the client funds extended investment strategy to be a decline of $85 to $90 million from $556 million in fiscal 2012. Its prior forecast anticipated a decline of $80 to $85 million.

ADP closed Monday's regular session at $59.55. The stock has been trading between $50.89 and $60.75 for the past 52 weeks.



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