Automatic Data Processing (NYSE: ADP) announced its third quarter results last week. Revenues other than interest on funds grew by 6% y-o-y to $2.28 billion driven mainly by growth in new sales. Interest on funds held for clients shrunk to $133.3 million compared to $148.6 million recorded same period last year, even though funds held increased by 18% to 29.9 billion. ADP provides payroll processing services and competes mainly with Paychex (NASDAQ: PAYX). 
See our full analysis on ADP
New Sales Growth Key Driver for Q3
New sales growth in the company’s employer, professional employer organizations (PEO) and dealer services was the key revenue driver for Q3, with total revenues rising 6.8% to $2.92 billion. ADP recorded net earnings of $452.4 million for the quarter, up 7% y-o-y. It estimates full year revenue to grow 7%-9% from 2011, taking its 2012 revenue to $10.6 – $10.8 billion.
The company also stated that the number of employees in its client payrolls was up 3.3%. Fee per employee is one of the key drivers for revenues, according to our analysis. We estimate this metric to rise from $245 currently to about $340 by the end of our forecast period.
Employment Growth And Cloud Key for 2012
Employment growth has been averaging almost 250,000 jobs a month since December 2011, and this is likely to slow down in the coming months.  We expect the number of jobs added by small and medium businesses to drive growth in 2012, and we expect the products launched for Android and iPhone to drive revenue in the near future with more businesses demanding access to enterprise data on their mobile phones.
We currently have a $58 Trefis Price Estimate for ADP, which is about 8% higher than its current market price.Notes: