Articles for ADP

With Small Business Hiring on a Roll, ADP’s Good for $58

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Thursday, January 12th, 2012 by Trefis Team

Last week ADP (NYSE:ADP) released its December 2011 employment report indicating the largest jump in employment in the year. According to the report, private-sector employment grew by 325,000 jobs from November to December across the nation. Service industry was the largest contributor creating 273,000 new jobs. Payrolls in the goods-producing industries increased by 52,000 employees, including 22,000 in the manufacturing sector.

As a result of the increase in hiring, the unemployment rate in US dropped to 8.5% in December 2011, the lowest since March 2009. This drop in unemployment is a good sign for US economy as well as payroll processing service providers like ADP and Paychex (NASDAQ:PAYX).

We currently have a $57.67 Trefis price estimate for ADP.

Uncertainty for ADP and Paychex Rises as Small Business Loans Fall

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Wednesday, December 21st, 2011 by Trefis Team

The small business loans of $1 million or less have been falling in number for the past three years are having a damaging effect on small business jobs, according to data from Federal Deposit Insurance Corporation. The lack of funding seems to be taking its toll with only 7 percent of small businesses planning to create new jobs over the next three months, according to National Federation of Independent Business’ (NFIB) latest Small Business Optimism Index. This is bad news for payroll processing firms like ADP (NASDAQ:ADP) and Paychex (NASDAQ:PAYX) which rely on small business clients.

We currently have a $57.67 Trefis price estimate for ADP, about 8% above the market estimate.

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Despite Difficult Jobs Environment, Paycheck (PAYX) Has a Bright Future

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Thursday, December 15th, 2011 by Trefis Team

Paychex (NASDAQ:PAYX) offers payroll processing to businesses of varying sizes around the country. The company charges per employee at its client firms. At first glance, the poor workforce figures in the U.S. with 9% unemployment might indicate a difficult landscape for the company. However, Paychex has actually remained relatively healthy. In the fiscal year ending May 2011, the firm generated over $2 billion in revenue along with $500 million in net profits. The quarter ending this past September also generated surprisingly more income than analyst expectations.

The company’s current share price is hovering around the Trefis $29 target. However, continued improvement in the underlying dynamics of the business could push the stock further. In particular, Trefis projects that the fee per employee serviced will grow from $165 in 2011 to $220 in 2018. Any appreciation of this rate will put vastly improve Paychex business model and stock price.

ADP Offers Higher Credit Rating and Yield Than the Federal Government

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Thursday, December 8th, 2011 by Trefis Team

Automatic Data Processing (NASDAQ: ADP) is one of four remaining American companies with a Triple A credit rating from the major credit rating agencies. The other firms include Microsoft (NASDAQ:MSFT), Johnson & Johnson (NYSE:JNJ) and Exxon Mobil (NYSE:XOM). The Triple A rating is actually greater than the U.S. government which was downgraded in August by Standard and Poors.

Based on the implications of its credit rating, ADP actually provides a higher dividend yield than the U.S government as well. With a market price just over $50 a share, ADP’s dividend is close to 3%. That compares favorably to the U.S. government bonds which only provide a 2% return on the 10 year note and even less on shorter time frames. In addition, the Trefis team has set a target price of $57.67 for the stock. That means there is potential for an additional 10 – 15% gain on the stock as well.

ADP Updates: Investors Get Higher Dividend Amid Choppy Markets

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Sunday, November 13th, 2011 by Trefis Team

Automatic Data Processing (NASDAQ:ADP), a leading provider of payroll processing and other human resource and tax services to businesses of varying sizes around the globe, announced on Tuesday that its board approved a 10% increase in its annual dividend marking the 37th year of continued dividend increases by the payroll giant. The increase will result in a new quarterly dividend of 39.5 cents per shares, up from previous quarterly dividend rate of 36 cents per share, and will cost roughly $17.1 million each payout.

The announcement comes at a good time as uncertain economic conditions continue to send frequent jitters into the global markets, thereby increase the popularity of dividends which offer a secure income stream. The board’s decision will surely make ADP investors happy.

Private Sector Employment Increase in US

According to ADP’s latest National Employment Report, private-sector employment in the US increased by 110,000 from September to October on a seasonally adjusted basis. While services added 114K of the total 110K jobs, good-producing jobs subtracted 4K, and manufacturing jobs as a subset declined by 8K.

We have a $57.67 Trefis price estimate for ADP, about 10% above the market estimates.

See our full analysis of ADP

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ADP’s Fundamentals Support $57 Value, New Offerings Will Drive Growth

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Thursday, November 10th, 2011 by Trefis Team

Automatic Data Processing (NASDAQ:ADP), the world’s largest payroll processor, reported strong revenue growth of 13% to $2.5 billion in its recent third quarter earnings. However, the stock dropped as seesawed following earnings as operating margins shrank and the company expected lower revenue growth of 7-9% for the full year. We believe the concerns for ADP are overdone as it’s core business remains sound. ADP competes with other payroll processors like Paychex (NASDAQ:PAYX) in the US.

We have a $57.67 Trefis price estimate for ADP, about 10% above the market estimate, based on our DCF valuation model. Below we take a look at some of the key take aways from ADP’s earnings.

See our full analysis of ADP

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Business Survey Gives Cautious Read on Small Business Hiring

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Monday, August 8th, 2011 by Trefis Team

We recently discussed ADP’s (NASDAQ:ADP) increasing focus on small businesses that are creating the majority of the jobs in the U.S. even as economic uncertainty continues and unemployment remains a major concern. See our note titled ADP Goes for Small Businesses to Beat Dismal Jobs Reports. However, according to a recent survey performed by Paychex (NASDAQ:PAYX) subsidiary SurePayroll regarding small businesses in the New York Metropolitan area, these employers are feeling the pain from tighter budgets as evidenced by lower salaries.

We have a $56.65 Trefis price estimate for ADP, which is about 15% above the current market price.

ADP Goes for Small Businesses to Beat Dismal Jobs Reports

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Thursday, August 4th, 2011 by Trefis Team

ADP (NASDAQ:ADP) recently reported that job creation is slowing which could spell a troubling trend for largest payroll process in the U.S.; however recent moves to focus more on small businesses that are creating the most jobs support the company’s outlook. ADP reported the number of jobs created dropped to 114,000 in July from 145,000 in June. In addition, the month of July also saw over 66,000 job cuts according to consulting firm Challenger, Gray & Christmas Inc. ADP competes with Paychex (NASDAQ:PAYX) and start-ups like Workday.

We have recently revised our Trefis price estimate for ADP to $56.65, which is about ~15% above the market price based on the Q4’11 earnings and the firm’s reported forecasts for 2012.

ADP’s Grows Beyond Payrolls Lifting Stock Value to $62.50

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Monday, July 11th, 2011 by Trefis Team

ADP (NASDAQ:ADP), the leading provider of payroll services and human resource outsourcing in the U.S., is making move to modernize its services and expand the range of services it provides to consumers. ADP handles payroll for one in six working Americans and competes with other established players like Paychex (NASDAQ:PAYX) as well as startups like Workday.

We currently have a $62.50 Trefis price estimate for ADP, about 15% above the current market price.

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ADP Targets Small Business Clients through Android Payroll Platform

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Friday, May 27th, 2011 by Trefis Team

ADP (NASDAQ:ADP), a leading provider of human resource outsourcing and payroll services in the U.S., serves many large businesses and also caters to a sizeable number of small businesses (fewer than 50 employees). The firm recently announced that its popular payroll management platform for small businesses, RUN Powered by ADP, is now also available for the Android smartphone operating platform. ADP’s competitors in this space include names like Paychex (NASDAQ:PAYX).