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Why Is ADP (ADP) Down 1.7% Since Last Earnings Report?
ZACKS· 2025-08-29 16:31
Core Viewpoint - Automatic Data Processing (ADP) reported strong fourth-quarter fiscal 2025 results, with earnings and revenues exceeding estimates, but has seen a recent decline in share performance compared to the S&P 500 [1][2]. Financial Performance - ADP's earnings per share (EPS) for Q4 fiscal 2025 was $2.26, beating the consensus estimate by 1.8% and increasing 8.1% year-over-year [2]. - Total revenues reached $5.1 billion, surpassing estimates by 1.5% and growing 5.7% year-over-year [2]. Segmental Results - Employer Services generated revenues of $3.5 billion, an 8% increase on a reported basis but missed the estimate of $3.8 billion [3]. - PEO Services revenues rose 9% year-over-year to $1.2 billion, falling short of the $1.7 billion estimate [3]. - Average worksite employees paid by PEO Services increased by 3% to 761,000 [3]. Interest and Client Funds - Interest on funds held for clients grew 11% year-over-year to $308 million, missing the estimate of $342.4 million [4]. - The average client funds balance increased by 6% to $38.1 billion, with the average interest yield expanding by 20 basis points to 3.2% [4]. Margins - Adjusted EBIT rose 9% year-over-year to $5.3 billion, with the adjusted EBIT margin increasing by 50 basis points to 26% [5]. - The margin for Employer Services increased by 50 basis points, while PEO Services saw a decrease of 20 basis points [5]. Balance Sheet and Cash Flow - At the end of Q4 fiscal 2025, ADP had cash and cash equivalents of $3.3 billion, up from $2.7 billion in the previous quarter [6]. - Long-term debt increased to $4 billion from $3 billion in the preceding quarter [6]. - The company generated $1.4 billion in cash from operating activities during the quarter [6]. Fiscal 2025 Outlook - ADP lowered its revenue growth guidance for fiscal 2025 to 5-6% from the previous 6-7% [7]. - Adjusted EPS growth guidance was updated to 8-10% from 8-9% [7]. - The adjusted effective tax rate is estimated at 23%, and the guidance for adjusted EBIT margin was raised to 50-70 basis points [7]. Estimate Trends - There has been a downward trend in estimates for ADP, indicating a shift in expectations [10][12]. - The stock currently holds a Zacks Rank 3 (Hold), suggesting an expectation of in-line returns in the coming months [12].