Automatic Data Processing, Inc. (Nasdaq: ADP) has reported a robust performance for the second quarter of fiscal 2025. The company recorded an 8% increase in revenues, reaching $5.0 billion compared to the same quarter last year. This growth was consistent on an organic constant currency basis as well. Net earnings saw a 10% rise to $963 million, with adjusted net earnings also increasing by 9% to the same figure. The adjusted EBIT rose by 11% to $1.3 billion, resulting in an adjusted EBIT margin improvement of 60 basis points, now standing at 25.2%.Diluted earnings per share (EPS) increased by 10% to $2.35, aligning with the adjusted diluted EPS growth. This performance underscores ADP’s continued success in capitalizing on the demand for human capital management solutions. According to Maria Black, President and CEO of ADP, the quarter’s achievements were marked by significant milestones, including a record-setting 50th consecutive year of dividend increases, reflecting the company’s commitment to shareholder value.The Employer Services segment experienced an 8% revenue increase on a reported basis and a 7% rise on an organic constant currency basis. U.S. pays per control increased by 1%, contributing to a 90 basis points improvement in the segment margin. Meanwhile, the PEO Services segment also reported an 8% revenue increase, although the segment margin decreased by 140 basis points. Interest on funds held for clients was a notable contributor to revenue, rising by 21% to $273 million, driven by an 8% increase in average client funds balances.
ADP Reports Better than Expected Results for Q2 FY’25ADP’s performance exceeded market expectations, which had anticipated an EPS of $2.3 and revenue of $4.97 billion for the quarter. The actual EPS of $2.35 and revenue of $5.0 billion reflect the company’s ability to leverage favorable market conditions and its strategic initiatives. The company’s effective tax rate for the quarter was 23.6% on both reported and adjusted bases, aligning with its financial planning.Don McGuire, Chief Financial Officer of ADP, highlighted the company’s success in surpassing revenue growth and margin performance expectations. This success was attributed to strong new business bookings and higher client funds interest revenue. The company’s strategic focus on enhancing profitability while investing in sustainable, long-term growth initiatives has been instrumental in achieving these results.ADP’s Employer Services segment outperformed expectations with an 8% growth in revenues and a significant margin improvement. The PEO Services segment also demonstrated strong revenue growth, although it faced margin pressures.
Guidance for Fiscal 2025: ADP Expects Revenue Growth of 6% to 7%Looking ahead, ADP maintains its fiscal 2025 outlook, expecting consolidated revenue growth of 6% to 7%. The company anticipates an adjusted EBIT margin expansion of 30 to 50 basis points and adjusted diluted EPS growth of 7% to 9%. The effective tax rate is projected to be around 23%. These projections indicate continued confidence in the company’s strategic direction and market opportunities.For the Employer Services segment, ADP forecasts revenue growth of 6% to 7% and margin improvements of 40 to 60 basis points. New business bookings are expected to grow by 4% to 7%, with a slight decrease in client revenue retention. The segment also anticipates a 1% to 2% increase in U.S. pays per control, reflecting stable demand for its services.In the PEO Services segment, ADP projects revenue growth of 5% to 6%, with revenues excluding zero-margin benefits pass-throughs expected to grow by 4% to 5%. The segment margin is anticipated to decrease by 70 to 90 basis points, reflecting ongoing investment in service enhancements and client acquisition strategies. Average worksite employee count is expected to grow by 2% to 3%, supporting the segment’s revenue growth objectives.More By This Author:T-Mobile Sets Ambitious Targets For 2025 Amid Strong Financial Results Should You Buy The NVDA Dip?RTX Corp Outperforms Expectations With $21.6 Billion In Q4 Revenue
