Why Is ADP (ADP) Up 4.6% Since Last Earnings Report?

Core Viewpoint - Automatic Data Processing (ADP) reported strong fourth-quarter fiscal 2024 results, with both earnings and revenues exceeding expectations, but has lowered its guidance for fiscal 2025 growth [2][6]. Financial Performance - ADP's earnings per share for Q4 fiscal 2024 were $2.1, beating the consensus estimate by 1% and increasing 10.6% year-over-year [2]. - Total revenues reached $4.8 billion, surpassing estimates and growing 6.5% from the previous year [2]. - Employer Services generated revenues of $3.2 billion, growing 7% year-over-year [3]. - PEO Services revenues rose to $1.6 billion, exceeding expectations and increasing 6% from the year-ago quarter [3]. - Interest on client funds increased 17% to $227 million, although it fell short of estimates [3]. Margins - Adjusted EBIT rose 9% year-over-year to $4.9 billion, with an adjusted EBIT margin of 25.5%, up 70 basis points [4]. - The margin for Employer Services increased by 220 basis points, while PEO Services saw a decline of 240 basis points [4]. Balance Sheet and Cash Flow - At the end of Q4 fiscal 2024, ADP had cash and cash equivalents of $2.9 billion, down from $3.3 billion in the previous quarter [5]. - Long-term debt remained stable at $3 billion [5]. - The company generated $1.3 billion in cash from operating activities during the quarter [5]. FY25 Guidance - ADP has revised its revenue growth guidance for fiscal 2025 to 5-6%, down from 6-7% [6]. - Adjusted EPS growth guidance has been lowered to 8-10% from 10-12% [6]. - The adjusted effective tax rate is estimated at 23%, and the adjusted EBIT margin guidance has been updated to 60-80 basis points [6]. Market Sentiment - Recent estimates for ADP have trended downward, indicating a shift in market sentiment [7][8]. - The stock currently holds a Zacks Rank 3 (Hold), suggesting an expectation of in-line returns in the coming months [8].