ADP (ADP) Tops Q2 EPS by 5c; Updates FY17 Outlook

ADP (NASDAQ: ADP) reported Q2 EPS of $0.81, $0.05 better than the analyst estimate of $0.76. Revenue for the quarter came in at $2.9 billion versus the consensus estimate of $2.92 billion.

Fiscal 2017 Outlook

Certain components of ADP’s fiscal 2017 outlook and related growth comparisons exclude the impact of the following items and are discussed on an adjusted basis where applicable. Please refer to the accompanying financial tables for a reconciliation of these adjusted amounts to their closest comparable GAAP measure.

• Fiscal 2016 first quarter pre-tax gain on sale of the AdvancedMD business of $29 million
• Fiscal 2016 second quarter pre-tax gain on sale of a building of $14 million
• Fiscal 2016 fourth quarter pre-tax workforce optimization charge of $48 million
• Fiscal 2017 pre-tax restructuring charges of approximately $90 million, $40 million of which occurred in the first quarter, with the remaining $50 million expected to occur in the latter part of the fiscal year
• Anticipated Fiscal 2017 second quarter pre-tax gain on sale of the CHSA and COBRA businesses of approximately $200 million

Subsequent to the disposition of our CHSA and COBRA businesses, ADP now forecasts full year revenue growth of 7% to 8% compared to our prior forecast of 7% to 9% growth. Foreign currency translation is not expected to have a significant impact on revenue growth in fiscal 2017. This revenue forecast still assumes growth in worldwide new business bookings of 4% to 6% compared to the $1.75 billion sold in fiscal 2016.

Reflecting the tax benefit received in the first quarter, ADP now anticipates an adjusted effective tax rate of 32.7% compared to the prior forecast of 33.3%. Subsequent to the disposition of our CHSA and COBRA businesses and the associated gain on sale, ADP now forecasts full year diluted earnings per share from continuing operations to grow 15% to 17% compared to our prior forecast of 6% to 8% growth and adjusted diluted earnings per share growth of 11% to 13% compared to our prior forecast of 10% to 12% growth. This earnings growth forecast now assumes an adjusted EBIT margin expansion of about 50 basis points compared to our prior forecast of 25 to 50 basis points. This forecast continues to assume fiscal 2017 share repurchases of $1.0 to $1.4 billion funded by existing balance sheet cash.

For earnings history and earnings-related data on ADP (ADP) click here.

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