ADP (ADP) Misses Q4 EPS by 5c

ADP (NASDAQ: ADP) reported Q4 EPS of $0.55, $0.05 worse than the analyst estimate of $0.60. Revenue for the quarter came in at $2.7 billion versus the consensus estimate of $2.74 billion.

ADP anticipates full-year fiscal 2016 revenue growth of 7% to 9% compared to fiscal 2015 revenue of $10.9 billion.

"ADP had another successful year, demonstrating that our strategy to drive sustainable growth is working," said Carlos Rodriguez, president and chief executive officer, ADP. "Our strong new business bookings growth across the ADP portfolio exceeded our expectations. This outperformance reflects the high demand for additional HCM solutions, including products that assist businesses in complying with the Affordable Care Act, and positions ADP well for long-term growth."

"ADP's results in fiscal 2015 reflect the fundamental strength of our business model," said Jan Siegmund, chief financial officer, ADP. "Our outperformance in new business bookings led to short-term pressure on our margins and earnings growth, but reflect the success of our offerings. ADP continued its shareholder friendly actions, and during fiscal 2015 returned approximately $2.5 billion of cash to shareholders through dividends and share repurchases."

Fiscal 2016 Outlook

ADP anticipates full-year fiscal 2016 revenue growth of 7% to 9% compared to fiscal 2015 revenue of $10.9 billion. This forecast includes an anticipated negative impact of one to two percentage points due to unfavorable foreign currency translation. ADP forecasts diluted earnings per share from continuing operations to grow 12% to 14% compared with $2.89 per share in fiscal 2015, including an expected negative impact of about one percentage point due to unfavorable foreign currency translation. This earnings per share forecast does not assume incremental share repurchases beyond anticipated dilution related to employee benefit plans.

ADP's earnings growth forecast represents an anticipated pretax margin expansion of about 50 basis points from 18.9% in fiscal 2015. Additionally, ADP anticipates an effective tax rate of 33.7% compared with 33.5% in fiscal 2015. Worldwide new business bookings are anticipated to grow 8% to 10% compared to over $1.6 billion sold in fiscal 2015.

Revenue growth for fiscal 2016 is expected to be lower in the first and second quarters of the fiscal year due to continued negative impacts expected from foreign currency translation, as well as the expected timing of starts that will convert to new recurring revenue from new business bookings sold during the fourth quarter of fiscal 2015. Therefore, ADP anticipates revenue growth to be below the guidance range of 7% to 9% in the first and second quarters of fiscal 2016, and above the guidance range of 7% to 9% in the third and fourth quarters of fiscal 2016.

In addition, ADP expects additional expense in the first and second quarters of the fiscal year resulting from investment in operational resources to support the implementation of higher-than-anticipated new business bookings in the fourth quarter of fiscal 2015. This additional expense, combined with the expected lower revenue growth in the first and second quarters, is anticipated to result in flat to slightly positive pretax earnings growth for the first and second quarters of fiscal 2016.

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