ADP's Q3 Revenue Up, Earnings Flat

Posted Apr 28th 2010 11:00AM by Tom Taulli
Filed under: Earnings Reports, Automatic Data Proc (ADP)

There's little question that Automatic Data Processing (ADP) has a solid business. With roughly 570,000 clients of all sizes, the company generates a large amount of recurring revenues and free cash flows. Besides, it is difficult for customers to move to an alternative payroll solution.

Despite all this, the fact remains that persistent unemployment is a drag. In the latest quarter, revenues inched up 3% to $2.44 billion and earnings came to $403.6 million, or $0.80 per share. This compares to $402.5 million, or $0.80 per share in the same period a year ago.

There were some bright spots, though. For example, ADP is seeing growth from small and mid-sized companies. Actually, there could be an uptick from the Hire Act that Congress recently passed.

What's more, it looks like larger companies will eventually start hiring again, which should represent a nice boost for ADP.

The problem is that the process has been slow. In other words, there are few catalysts for this stock for the next couple quarters. So for investors looking for a play to benefit from the job recovery, it looks too soon for the shares of ADP.

Tom Taulli advises on business tax preparation and is also the author of a variety of books, including The Complete M&A Handbook. His website is at Taulli.com.

Tags: APD, earnings, inthenews, Jobs