Human Capital Management Notes: ADP, Paychex In Focus

September 25th, 2015 · by Trefis Team
ADPYTD+4.8%SPYYTD+13.7%XLIYTD+10.4%
Analyze ADP →

Paychex (NASDAQ:PAYX) announced this week that the Paychex IHS Small Business Jobs Index (SBJI) will have a more detailed report on small business employment opportunity and will include a more detailed analysis of hiring trends across the U.S. starting September 29. [1] Both Paychex and rival ADP (NASDAQ:ADP) released their monthly reports pertaining to small business employment and national private sector employment metrics for August earlier this month. Below we take a look at some of these reported metrics. The stocks of ADP and Paychex rose by 1-2% through the last week as compared to the 3% decline in the Dow Jones Industrial Average and the Nasdaq Composite indices.

Paychex

Paychex released the Paychex IHS Small Business Jobs Index earlier this month. The index, which analyzes changes in small business employment trends, declined by 0.17% sequentially in the month of August, following several months of little or no movement in employment growth. Despite the slight dip in August, Paychex CEO Marty Mucci remained hopeful of future growth in small business. [2] According to recent SBJI figures, Paychex is still ahead of its 2004 base figures, indicating that the company is expecting consistent growth opportunities to continue and expects a higher growth rate of employment in the small business market. [3] Additionally, Paychex will now provide a more detailed report on small business jobs that will include individual analyses on eight industrial sectors including construction, manufacturing, financial services, education and health services, trade and transportation, professional services, hospitality and other private services. The new report will also include separate indexes for regional, state and metropolitan geographic categories. The new format will also include a feature that will allow users to compare the report to different base years in addition to 2004 as the currently used base year. [1]

  • Trefis has a $48 price estimate for Paychex’s stock, implying a market cap of $17.2 billion. This is roughly in line with the current market price.
  • Paychex’s stock rose by over 1% over the last week.
  • We estimate revenues of $2.95 billion and EPS of $2.01 for fiscal 2016, in line with Reuters’ consensus estimate.

Click here to see our complete analysis of Paychex

[trefis_slideshow ticker=”PAYX” rhs=”03″]

ADP

ADP reported solid growth figures for private sector employment numbers in August. According to the ADP National Employment Report, private sector jobs increased by about 190,000 from July to August. [4] The total number of jobs was up by 85,000 for small businesses (49 or less employees), while medium businesses (50-499 employees) added about 66,000 jobs through the month. The total number of non-farm private jobs added from January through August this year stood at almost 1.5 million.

At the end of August, ADP announced that it will repurchase about 25 million shares over the next 12-24 months. [5] The company will raise debt of around $2 billion for the share buybacks. ADP already has about 26 million shares pending from its previous repurchase program. [6] Following the announcement of ADP’s first-ever buyback funded by debt, Moody’s Investor services downgraded ADP’s rating from Aa1 to Aa3 in late August. [7]

  • Trefis currently has $78 price estimate for ADP’s stock, implying a market cap of $36.7 billion. This is in line with the current market price.
  • ADP’s stock rose by almost 2% in the last one week.
  • We estimate revenues of $11.9 billion and EPS of $3.41 for fiscal 2016, compared to the Reuters’ consensus of $3.27.

Click here to see our complete analysis of ADP

[trefis_slideshow ticker=”ADP” rhs=”03″]

View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research

Notes:
  1. Paychex|IHS Small Business Jobs Index to Deliver New Data and Analysis on Small Business Employment Growth, Market Watch, September 2015 [↩] [↩]
  2. Small business is back: Paychex CEO, Yahoo! Finance, September 2015 [↩]
  3. Paychex: This Month’s Highlights, Paychex Jobs Index, September 2015 [↩]
  4. ADP National Employment Report, ADP Press Release, September 2015 [↩]
  5. ADP Announces Intention to Initiate a $2.0 Billion Debt Offering at a Future Date, Market Watch, August 2015 [↩]
  6. ADP to Offer $2 Billion in Debt, Boost Stock Buyback in Tweak to Capital Structure, Nasdaq, August 2015 [↩]
  7. Moody’s dislikes ADP’s debt-funded share buyback plan, Market Watch, August 2015 [↩]
Invest with Trefis →More Ideas →