Automatic Data Processing Inc. (ADP) reported Wednesday a 2.6% growth in profit for the first quarter, reflecting lower costs and expenses that offset a 4% decline in revenues that were negatively impacted by the severe economic conditions. Quarterly earnings per share as well as top line beat market projections. Further, the Roseland, New Jersey-based outsourcing solutions provider lifted the lower end of its fiscal 2010 adjusted earnings forecast range.
Automatic Data Processing, or ADP, reported that its first-quarter net earnings rose to $284.1 million from $276.9 million last year, while earnings per share grew 4% to $0.56 from prior year's $0.54 per share, on fewer shares outstanding.
On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $0.50 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenues declined 4% to $2.10 billion from $2.18 billion in the same quarter last year, yet beat fourteen Wall Street analysts' estimated revenues of $2.05 billion. The company noted that revenues continue to be negatively impacted by the severe economic conditions that began toward the end of the prior fiscal year's first quarter. In the quarter, unfavorable foreign exchange comparisons contributed two percentage points of revenue decline.
Revenues, other than interest on funds held for clients and PEO revenues, fell to $1.68 billion from $1.75 billion a year ago. Interest on funds held for clients was $127.9 million, down from $151.9 million last year. Meanwhile, PEO revenues grew to $293.9 million from prior year's $277.1 million.
ADP, which serves about 570 thousand clients, offers the widest range of HR, payroll, tax and benefits administration solutions from a single source. The company also provides integrated computing solutions to auto, truck, motorcycle, marine and recreational vehicle dealers throughout the world. Segment-wise, revenues from Employer Services declined 3% year-over-year to $1.49 billion for the first quarter. In the United States, revenues from traditional payroll and payroll tax filing business declined 7%, while beyond payroll revenues grew 3%.
However, PEO Services revenues grew 6% to $296.2 million mainly on higher benefits pass-through revenues that resulted from increases in both benefit rates and the number of worksite employees.
Combined Employer Services and PEO Services worldwide new business sales declined 2% for the quarter.
In the Dealer Services segment, revenues were $313.5 million, down 4% from last year, mainly due to continued dealership closings and consolidations as well as lower transactional revenues related to lower car sales volumes. Total costs of revenues for the quarter fell to $1.19 billion from last year's $1.24 billion, and total expenses were down to $1.69 billion from $1.78 billion a year ago.
Commenting on the results, Gary Butler, president and chief executive officer, said, "I am encouraged by ADP's first quarter results. As anticipated, the comparison to a year ago was difficult as the prior fiscal year's first quarter was not significantly impacted by the economic slowdown that began in September 2008. Revenues were slightly ahead of our expectations and ADP achieved better than anticipated earnings results. The actions taken in last year's fourth quarter to reduce our expense structure benefited the current quarter's results."
In its preceding fourth quarter, ADP reported that net earnings rose to $352.8 million or $0.70 per share from $233.5 million or $0.45 per share in the year ago period, despite a decline in revenues, bolstered by lower operating costs. Net earnings from continuing operations climbed to $347.4 million or $0.69 per share from $226 million or $0.43 per share in the prior-year quarter. Adjusted earnings from continuing operations, excluding tax settlements, increased to $227.4 million or $0.45 per share, from $216 million or $0.42 per share last year. Total revenues dropped to $2.11 billion from $2.21 billion in the same period last year, negatively impacted by severe economic conditions and unfavorable foreign exchange.
Among others in the sector, human resources services provider Administaff Inc.(ASF) Monday reported a sharp decline in profit for the third quarter to $5.83 million or $0.23 per share from $11.93 million or $0.46 per share in the previous year. Quarterly revenues dropped 7.3% to $390.91 million from $421.91 million in the year-earlier quarter, due to a 9.9% decrease in the average number of worksite employees paid per month, partially offset by a 2.8% increase in revenues per worksite employee per month.
Staffing and outsourcing solutions provider Paychex Inc. (PAYX) in September reported a 17% fall in profit for the first quarter to $123.6 million or $0.34 per share from $148.7 million or $0.41 per share a year ago, as weak economic conditions, credit crisis in the financial markets and extremely low investment rates of return continued to hurt its results. The Rochester, New York-based company's total revenue for the quarter fell 6% to $500.21 million from $534.09 million in the same quarter last year.
Information management systems provider Fiserv, Inc. (FISV) last week reported that its net income for the third quarter more than doubled to $115 million from $78 million in the year-ago quarter, reflecting lower expenses. On a per share basis, earnings increased to $0.74 per share from $0.48 per share last year. Revenues for the quarter, however, dropped to $992 million from $1.04 billion in the prior-year quarter, hurt by weaker processing and services and product sales.
Further, ADP updated its fiscal 2010 forecasts for total revenues and earnings per share. The company now expects earnings per share in a range of $2.34 to $2.39, excluding favorable tax settlements in the fourth quarter, in comparison to last year's earnings of $2.39 per share. Earlier, the company expected earnings to be in the range of $2.29 to $2.39 per share, excluding favorable tax settlements.
Total revenues are now expected to decline 1% to 2%, compared to previous forecast of 1% to 4% drop.
Analysts expect the company to earn $2.35 per share for the year, with estimates ranging between $2.29 and $2.39 per share, while revenues are projected to be $8.72 billion, representing a 1.6% drop from last year.
Butler said, "Certain market indicators suggest that the U.S. economy has reached the trough of the downturn and has begun to stabilize; however, the economic landscape is still challenging and the timing of the inevitable recovery remains uncertain. We continue to anticipate that the tough year-over-year comparisons will abate as the fiscal year progresses."
Segment-wise, Employer Services revenues are expected to decline 1% to 2%, and Pays per control are estimated to drop 4% to 5%. In the PEO Services segment, full-year revenues are projected to increase 4% to 6%, driven by benefits pass-through revenues, while Employer Services and PEO Services new business sales are expected to be about flat. Dealer Services revenues are estimated to decline 3% to 6% in the year.
Butler added, "I am cautiously optimistic as I look ahead to the coming months. Even though the pace of the economic recovery is unclear, ADP is positioned well to leverage the inevitable recovery. We are focused on the right things to maintain our market leadership positions, including providing excellent service to our clients and executing against our five point strategic growth program. Our foundation for growth is strong, and I continue to be optimistic about ADP's long-term growth prospects."
ADP is currently trading at $40.65, unchanged from the previous close. The shares have been trading between $31.67 and $41.27 for the past 52 weeks.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.