Automatic Data Processing (ADP) Q3 Earnings Beat Estimates

Core Insights - Automatic Data Processing, Inc. (ADP) reported strong third-quarter fiscal 2024 results, with earnings and revenues exceeding expectations [1] Financial Performance - Earnings per share reached $2.9, surpassing the consensus estimate by 4.4% and increasing 14.3% year-over-year [1] - Total revenues amounted to $5.3 billion, slightly beating the consensus estimate and growing 6.6% year-over-year on a reported basis, and 6% on an organic constant-currency basis [1] Segmental Results - Employer Services generated revenues of $3.6 billion, an 8% increase on a reported basis and 7% at constant currency, meeting estimates [2] - PEO Services revenues rose 5% year-over-year to $1.7 billion, exceeding the estimate of $1.6 billion [2] - Interest on funds held for clients grew 29% year-over-year to $321 million, surpassing the estimate of $255.8 million [2] - Average client funds balance increased 6% to $41.7 billion, with an average interest yield on client funds expanding 50 basis points to 3.1% [2] Margins - Adjusted EBIT increased 12% year-over-year to $1.5 billion, with the adjusted EBIT margin growing 140 basis points to 29.3% [3] - The margin for Employer Services increased by 230 basis points, while PEO Services saw a decrease of 220 basis points [3] Balance Sheet & Cash Flow - ADP ended the third quarter with cash and cash equivalents of $3.3 billion, up from $1.6 billion in the previous quarter [4] - Long-term debt remained flat at $3 billion [4] - The company generated $1.5 billion in cash from operating activities during the quarter, with capital expenditure amounting to $1.9 million [4] FY24 Outlook - For fiscal year 2024, ADP anticipates revenue growth of 6-7% and adjusted EPS growth of 10-12% [5] - The adjusted effective tax rate is expected to be 23%, with an adjusted EBIT margin growth of 60-70 basis points [5] - Employer Services revenues are projected to grow by 7-8%, while PEO Services revenues are expected to rise by 3-4% [5]