ADP Raises Profit Outlook To 10% To 12% EPS Growth As Client-Cash Interest Climbs 15%
The payroll company lifted its revenue and adjusted earnings-per-share growth targets after first-quarter profit outpaced sales.
ADP, which provides payroll, HR and workforce management software and outsourcing to employers, now expects adjusted earnings per share to grow 10% to 12% this fiscal year, up from 9% to 11% in its July outlook, according to its earnings release on Wednesday. It also lifted its revenue growth forecast to about 6%, from 5% to 6%.
Profit outran sales
First-quarter net earnings rose 11% to $1.1 billion, and diluted earnings per share climbed 14% to $2.83. Adjusted diluted EPS rose 13% to $2.82. Revenue grew 6% to $5.5 billion, also 6% on an organic constant-currency basis.
Adjusted EBIT, a measure of operating profit, rose 12% to $1.5 billion, and its margin widened 130 basis points to 26.8%. Employer Services segment margin also rose 130 basis points, while PEO Services margin was flat.
CEO Maria Black said ADP is "off to a strong start in fiscal 2027." CFO Peter Hadley said the quarter "exceeded our expectations across revenue growth, adjusted EBIT margin expansion, and adjusted EPS growth."
Interest on client cash does the lifting
Interest on funds held for clients rose 15% to $329 million. Average client balances grew 6% to $36.9 billion, and the average yield rose 30 basis points to 3.6%.
The company raised its full-year client-funds forecast too: interest of $1.59 billion to $1.61 billion, up from $1.54 billion to $1.56 billion in July. It now assumes balances grow 4% to 5%, up from 3% to 4%, with yield rising to about 3.8%, from about 3.7%.
ADP's segments grew at similar rates. Employer Services revenue rose 6%, and U.S. pays per control, its gauge of employees on client payrolls, rose 2%. PEO Services revenue, from the business in which ADP and clients co-employ workers, rose 7%, and average worksite employees rose 2% to about 771,000.
Buybacks double, outlook details
ADP spent $758.8 million repurchasing its stock in the quarter, against $366.0 million a year earlier. Diluted weighted average shares fell 2%.
The rest of the outlook is unchanged from July: adjusted EBIT margin expansion of 70 to 90 basis points and an adjusted tax rate of about 23%. Diluted EPS growth is forecast at 12% to 14%.
ADP held its analyst call at 8:30 a.m. ET Wednesday.
The company's new outlook puts fiscal 2027 adjusted EPS growth at 10% to 12%, measured from $11.12 in fiscal 2026.
Sources
- 8-K Filing — AUTOMATIC DATA PROCESSING INC (ADP) — SEC EDGAR
- Exhibit q1fy27exhibit99.htm — AUTOMATIC DATA PROCESSING INC 8-K exhibit — SEC EDGAR
- Automatic Data Processing (ADP) Stock Could Trade At A 17% Premium On Cash Flow — Yahoo Finance
- Paychex, Inc. (PAYX) vs. ADP and PAYC: Can Its Dividend Moat and Recurring Revenue Strength Restore Investor Confidence? — Yahoo Finance
- ADP National Employment Report Preliminary Estimate for October 10, 2026 — prnewswire.com
