ADP Poised for Another Quarter of Growth

Analysts expect accelerating adjusted EPS improvement

By
Nathan Reiff
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Nathan Reiff has been writing expert articles and news about financial topics such as investing and trading, cryptocurrency, ETFs, and alternative investments on Investopedia since 2016.
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Published January 20, 2023
Organization chart with hierarchy structure of teams and employees in company. Human Resources Managers working with HR organizational diagram on computer screen in office, career concept
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Key Takeaways

  • ADP is likely to report Q1 FY 2023 adjusted EPS of $1.94 vs. $1.65 in the prior-year quarter.
  • Revenue could climb by 9% to $4.4 billion.
  • ADP has posted consistent improvement in recent quarters as the labor market and unemployment figures have been strong, despite inflation, high interest rates, and other headwinds.

Human resources software company ADP Inc. (ADP) will probably say profits and revenue climbed for the company's second quarter FY 2023 amid a strong labor market.

ADP will likely report net income of $805.1 million when it announces earnings after markets close on Jan. 25. Adjusted earnings per share (EPS) probably increased roughly 18% year-over-year to $1.94. Revenue is expected to have improved 9% to $4.4 billion, according to estimates from Visible Alpha.

ADP Key Stats
  Estimate for Q2 FY 2023 Actual for Q2 FY 2022 Actual for Q2 FY 2021
Adjusted EPS ($) 1.94 1.65 1.52
Revenue ($B) 4.4 4.0 3.7

Source: Visible Alpha

ADP's business thrived in recent quarters as nonfarm payrolls increased faster than expected and unemployment remained low. The performance of the job market has coincided with healthy demand for ADP's HR products and services despite headwinds including a series of interest rate hikes by the Federal Reserve, inflation, and the threat of a cooling economy.

The firm has also expanded its international business through in-country software offerings as well as cloud-based services covering broader regions globally. The worldwide labor market has experienced an uneven recovery following the pandemic, as the war in Ukraine and tightening monetary policies have slowed job growth in some areas.

ADP recently increased its dividend by 20% for a 48th consecutive year and announced in November a $5-billion stock repurchase program.

Shares of ADP have outperformed the market in the last year, rising about 8% compared with an 18% fall for the benchmark S&P 500 Information Technology Index.

One Year Total Return for S&P 500 Information Technology and ADP
Aource: TradingView.
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  1. Nasdaq.com. "With The Job Market Holding Up, What To Expect From ADP's Q2 Earnings?"

  2. ADP Inc. "ADP wins the Global Payroll Supplier of the Year award."

  3. ADP Inc. "Events & Presentations."

  4. Visible Alpha. "Financial Data."

  5. CNBC. "Payrolls and wages blow past expectations, flying in the face of Fed rate hikes."

  6. Nasdaq.com. "Here's Why One Should Hold Automatic Data Processing (ADP) Now."

  7. Reuters. "Global jobs growth will 'deteriorate significantly' this quarter - ILO."

  8. ADP Inc. "ADP Authorized to Purchase $5 Billion of its Common Stock."

  9. ADP Inc. "ADP Increases Cash Dividend; Marks 48th Consecutive Year of Dividend Increases."

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