ADP (ADP) Tops Q4 EPS by 2c

ADP (NASDAQ: ADP) reported Q4 EPS of $0.69, $0.02 better than the analyst estimate of $0.67. Revenue for the quarter came in at $2.9 billion versus the consensus estimate of $2.94 billion.

“Our results reflect our continued ability to adapt across the HCM product and service spectrum to the dynamic and ever changing needs of our clients,” said Carlos Rodriguez, president and chief executive officer, ADP. “We were very pleased with our strong new business bookings and the contribution from products that assist businesses in complying with the Affordable Care Act, or ACA. We believe our investments in the business to drive innovation, our efforts to simplify the product portfolio, and our future plans to invest in better alignment of our service model are essential for our long-term success.”

“ADP’s results in fiscal 2016 were solid and reflect the impact of investments in implementation and operational resources that were made during the fiscal year as we supported our clients through the first year of the ACA-related reporting requirements,” said Jan Siegmund, chief financial officer, ADP. “Beginning in fiscal 2017, we are making investments in support of our service alignment initiative, which is expected to enhance the client service model and drive operational efficiencies over the longer-term.”

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, $45 million of which is expected to occur in the first quarter, and $45 million of which is expected to occur in the latter part of the fiscal year

ADP anticipates full-year fiscal 2017 revenue growth of 7% to 9% compared to fiscal 2016 revenue of $11.7 billion. Foreign currency translation is not expected to have a significant impact on revenue growth in fiscal 2017. This revenue forecast assumes growth in worldwide new business bookings of 4% to 6% compared to the $1.75 billion sold in fiscal 2016.

ADP anticipates diluted earnings per share from continuing operations to grow 6% to 8% compared with $3.25 in fiscal 2016. Adjusted diluted earnings per share from continuing operations is expected to grow 10% to 12% compared with the adjusted $3.26 per share in fiscal 2016. This earnings growth forecast assumes an adjusted EBIT margin expansion of 25 to 50 basis points from the adjusted EBIT margin of 19.5% in fiscal 2016. Additionally, ADP anticipates an adjusted effective tax rate of 33.3% which is flat compared to fiscal 2016. This forecast assumes fiscal 2017 share repurchases of $1.0 to $1.4 billion funded by existing balance sheet cash.

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