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Automatic Data Processing (ADP)
:ADP
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Automatic Data Processing
(NASDAQ:ADP)
77Outperform
Positive Factors
Financial Performance
ADP reported another strong quarter, indicating a robust performance and solid financial health.
Market Leadership
ADP is a global market leader with a diversified customer base, serving over 1.1 million clients across different industries in 141 countries.
Strategic Partnerships
The recently announced joint venture with Fiserv is seen as a unique partnership that leverages strong distribution capabilities and creates a one-stop-shop solution for small and medium-sized businesses.
Negative Factors
Competitive Environment
ADP participates in a highly competitive environment which could create downward pressure on product pricing and margins.
Cybersecurity Risks
Cybersecurity incidents and attacks could harm ADP’s business or damage its brand and reputation, leading to the loss of existing customers.
Revenue Volatility
Revenue is cyclical in nature due to its unique pricing model, leading to more uncertainty and volatility in revenue projections.
Automatic Data Processing (ADP) vs. S&P 500 (SPY)
Market Cap
$119.45B
Dividend Yield2.02%
Average Volume (3M)2.05M
Price to Earnings (P/E)30.6
Beta (1Y)0.64
Revenue Growth7.09%
EPS Growth11.51%
CountryUS
Employees64,000
SectorIndustrials
Sector Strength75
IndustryStaffing & Employment Services
Share Statistics
EPS (TTM)9.59
Shares Outstanding406,870,880
10 Day Avg. Volume1,715,751
30 Day Avg. Volume2,045,329
Financial Highlights & Ratios
PEG Ratio2.66
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap1.02
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit13.97
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$319.40Price Target Upside7.99% Upside
Rating ConsensusHold
Number of Analyst Covering5
Automatic Data Processing Business Overview & Revenue Model
Company DescriptionAutomatic Data Processing, Inc. provides cloud-based human capital management solutions worldwide. It operates in two segments, Employer Services and Professional Employer Organization (PEO). The Employer Services segment offers strategic, cloud-based platforms, and human resources (HR) outsourcing solutions. Its offerings include payroll, benefits administration, talent management, HR management, workforce management, insurance, retirement, and compliance services, as well as integrated HCM solutions. The PEO Services segment provides HR outsourcing solutions to small and mid-sized businesses through a co-employment model. This segment offers benefits package, protection and compliance, talent engagement, expertise, comprehensive outsourcing, and recruitment process outsourcing services. The company was founded in 1949 and is headquartered in Roseland, New Jersey.
How the Company Makes MoneyADP makes money primarily through its suite of HCM services, which are offered on a subscription and service-fee basis. Key revenue streams include payroll processing services, which involve calculating, withholding, and remitting employee taxes and paychecks, and human resources outsourcing services, where ADP manages various HR functions on behalf of its clients. ADP also generates revenue from additional services such as talent management, employee benefits administration, and retirement services. The company benefits from strategic partnerships with financial institutions and technology providers, which enhance its service offerings and expand its market reach. ADP's revenue is bolstered by its robust client retention rates and continuous innovation in cloud-based and mobile solutions, which attract new customers and encourage existing ones to adopt additional services.
Automatic Data Processing Key Performance Indicators (KPIs)
Any
Revenue by Segment
Analyzes revenue from different business units, highlighting which areas are driving growth and which may need strategic adjustments to improve performance.
Analyzes revenue from different business units, highlighting which areas are driving growth and which may need strategic adjustments to improve performance.
Data provided by:
Main Street Data
Main Street DataAutomatic Data Processing Financial Statement Overview
Summary
ADP demonstrates robust financial performance with strong revenue and profit margins. The income statement shows impressive growth, the balance sheet is stable with manageable leverage, and cash flow generation is solid, providing financial flexibility.Income Statement
ADP shows strong revenue growth with a TTM increase of 10.6% from the previous year. The gross profit margin is healthy at 46.97% for TTM, indicating efficient cost management. The net profit margin has improved to 19.76% in TTM, showcasing enhanced profitability. EBIT and EBITDA margins remain robust at 19.35% and 30.71%, respectively, reflecting solid operational performance.85
Very Positive
Balance Sheet
ADP maintains a stable balance sheet with a debt-to-equity ratio of 0.84, indicating manageable leverage. The return on equity (ROE) is strong at 77.46%, highlighting effective use of equity to generate profits. The equity ratio stands at 7.92%, suggesting a relatively low equity base compared to total assets, which could pose a risk if liabilities increase significantly.78
Positive
Cash Flow
ADP exhibits solid cash flow performance with a free cash flow growth rate of 21.64% over the past year. The operating cash flow to net income ratio is 1.21, indicating good cash generation relative to accounting profits. The free cash flow to net income ratio of 1.11 further supports the company's ability to convert earnings into cash, providing financial flexibility.82
Very Positive
| Breakdown | ||||
| Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 | Jun 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 19.20B | 18.01B | 16.50B | 15.01B | 14.59B | Gross Profit |
| 8.73B | 8.06B | 7.04B | 6.37B | 6.14B | EBIT |
| 4.98B | 4.51B | 3.80B | 3.32B | 3.14B | EBITDA |
| 5.80B | 5.24B | 4.41B | 3.93B | 3.77B | Net Income Common Stockholders |
| 3.75B | 3.41B | 2.95B | 2.60B | 2.47B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 2.91B | 2.10B | 1.47B | 2.58B | 1.91B | Total Assets |
| 54.36B | 50.97B | 63.07B | 48.77B | 39.17B | Total Debt |
| 3.71B | 3.34B | 3.49B | 3.33B | 2.35B | Net Debt |
| 791.90M | 1.26B | 2.06B | 753.00M | 440.50M | Total Liabilities |
| 49.82B | 47.46B | 59.84B | 43.10B | 33.41B | Stockholders Equity |
| 4.55B | 3.51B | 3.23B | 5.67B | 5.75B |
| Cash Flow | Free Cash Flow | |||
| 3.59B | 3.64B | 2.55B | 2.59B | 2.41B | Operating Cash Flow |
| 4.16B | 4.21B | 3.10B | 3.09B | 3.03B | Investing Cash Flow |
| -1.39B | -2.52B | -7.01B | -3.52B | 3.16B | Financing Cash Flow |
| -1.43B | -15.68B | 13.65B | 6.44B | -5.89B |
Automatic Data Processing Technical Analysis
Positive
295.77
Price Trends
299.67
Negative
298.06
Negative
286.40
Positive
Market Momentum
-1.46
Negative
50.33
Neutral
62.39
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ADP, the sentiment is Positive. The current price of 295.77 is above the 20-day moving average (MA) of 294.18, below the 50-day MA of 299.67, and above the 200-day MA of 286.40, indicating a neutral trend. The MACD of -1.46 indicates Negative momentum. The RSI at 50.33 is Neutral, neither overbought nor oversold. The STOCH value of 62.39 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ADP.
Automatic Data Processing Risk Analysis
Automatic Data Processing disclosed 16 risk factors in its most recent earnings report. Automatic Data Processing reported the most risks in the “Tech & Innovation” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Automatic Data Processing Peers Comparison
Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $119.45B | 30.63 | 83.72% | 2.02% | 7.09% | 11.51% | |
75 Outperform | $51.93B | 29.98 | 44.25% | 2.74% | 4.35% | 4.86% | |
69 Neutral | $3.33B | 13.85 | 13.92% | 2.57% | -3.27% | 62.57% | |
69 Neutral | $3.85B | 23.72 | 162.14% | 1.29% | 1.50% | -44.95% | |
68 Neutral | $2.96B | 32.83 | 95.48% | 3.04% | 1.47% | -45.91% | |
63 Neutral | $4.30B | 11.36 | 5.41% | 214.65% | 4.15% | -9.13% | |
61 Neutral | $4.53B | 22.20 | 14.49% | 4.95% | -7.81% | -40.22% |
* Industrials Sector Average
Performance Comparison
ADP
Automatic Data Processing
295.77
58.97
24.90%
NSP
Insperity
67.23
-32.97
-32.90%
KFY
Korn Ferry
61.72
2.39
4.03%
PAYX
Paychex
146.41
31.03
26.89%
RHI
Robert Half
44.26
-22.61
-33.81%
TNET
TriNet Group
78.36
-20.88
-21.04%
Automatic Data Processing Earnings Call Summary
Earnings Call Date:Jan 29, 2025
(Q2-2025)
| % Change Since: -0.32%|
Next Earnings Date:Apr 30, 2025
Earnings Call Sentiment Positive
ADP reported strong financial performance with significant achievements such as a 50th consecutive year of dividend increase, notable growth in new business bookings, and strategic partnerships. However, there were challenges such as slight declines in retention and pressures on PEO margins. The outlook remains optimistic despite some anticipated headwinds in the next quarter.Q2-2025 Updates
Positive Updates
50th Consecutive Year of Dividend Increase
ADP's Board of Directors approved a 10% increase to the quarterly dividend, marking the 50th consecutive year of dividend increases, placing ADP among an elite group of dividend kings.
Strong Financial Performance
ADP reported 8% revenue growth, 60 basis points of adjusted EBIT margin expansion, and 10% adjusted EPS growth for the second quarter.
Record Employer Services New Business Bookings
ADP achieved record volumes for fiscal second quarter in Employer Services new business bookings, with strong growth across HR outsourcing, compliance, and enterprise businesses.
Strategic Partnership with Fiserv
ADP announced a partnership with Fiserv, integrating Fiserv's small-business solutions with ADP's Run platform, offering an all-in-one solution for small businesses.
Successful Integration of WorkForce Software
The acquisition of WorkForce Software is progressing well. ADP is integrating WorkForce's tools with ADP HCM platforms, leading to new business opportunities.
Continued Growth in ADP Lyric
ADP Lyric, the new HCM platform, showed strong interest and increased new business booking volumes. The pipeline for Lyric is significantly up compared to last year.
Negative Updates
Slight Decline in Employer Services Retention
Employer Services retention declined slightly compared to the prior year, although it modestly exceeded expectations.
Deceleration in Employer Services Pays Per Control Growth
Employer Services pays per control increased by 1% in Q2, decelerating from 2% growth in Q1.
PEO Margin Decrease
PEO margin decreased by 140 basis points in the quarter due to higher zero margin benefits pass-through revenue growth and an increase in costs.
FX and Short-Term Interest Rate Headwinds
Recent FX headwinds and lower short-term interest rates are expected to impact revenue growth, particularly in Q3.
Company Guidance
During ADP's second quarter fiscal 2025 earnings call, the company reported notable financial metrics, including 8% revenue growth, a 60 basis point expansion in adjusted EBIT margin, and a 10% increase in adjusted EPS. The Employer Services (ES) segment saw record volumes in new business bookings, with robust growth across HR outsourcing and small-business offerings. However, ES retention slightly declined, though it exceeded expectations. Pays per control in ES increased by 1%, a deceleration from 2% in Q1, while PEO revenue grew by 8%, driven by strong new business bookings. ADP maintained its full-year guidance, anticipating 6% to 7% consolidated revenue growth, adjusted EBIT margin expansion of 30 to 50 basis points, and adjusted EPS growth of 7% to 9%. Additionally, a strategic partnership with Fiserv aims to enhance small-business solutions, and the integration of WorkForce Software is progressing as expected.Automatic Data Processing Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
ADP Announces Leadership Change and Executive Promotion
Positive
Nov 8, 2024
Automatic Data Processing, Inc. (ADP) is undergoing a leadership change with John C. Ayala stepping down as COO and Joseph DeSilva taking over as Executive Vice President, North America and Chief of Operations. DeSilva’s promotion comes with a 6.2% salary increase and a boosted bonus target, signaling ADP’s strategic moves for future growth.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.