Automatic Data (ADP) Q4 Earnings: Will It Surprise This Time?
Zacks Investment Research | Jul 24, 2016 09:11PM ET
Automatic Data Processing, Inc. (NASDAQ:ADP) is set to report fourth-quarter fiscal 2016 results on Jul 28. Last quarter, it had posted a negative earnings surprise of 0.85%. The company has posted an average negative earnings surprise of 0.40% over the past four quarters.
Let’s see how things are shaping up for this announcement.
AUTOMATIC DATA Price and EPS Surprise
Factors to Consider
Automatic Data Processing holds a dominant position in the payroll processing and human capital management market, primarily due to its robust product portfolio. The company continues to frequently upgrade its existing product portfolio as well as launch new products. We believe that the company’s higher revenue per client, strong customer retention ratio and lower cost of operations also place it in an advantageous position.
Automatic Data Processing’s TotalSource and Analytics divisions are also showing strength and the trend is likely to continue. In addition, the company is divesting its non-core assets to focus more on its primary business.
However, the company has been seeing some negative impact on its retention rate owing to the migration from the legacy business and increasing competition in the sphere. To overcome this to an extent, the company has been ramping up its resources in the service-and-support division in tune with growing demand. While we expect the company’s continuous investments in these new initiatives to drive growth over the long term, it will weigh on near-term earnings.
In addition, a volatile macroeconomic environment, strengthening U.S. dollar and increasing competition are the other near-term headwinds.
Earnings Whispers
Our proven model does not conclusively show that Automatic Data Processing will beat earnings this quarter. This is because a stock needs to have both a positive Zacks Investment Research
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