The company's most recent quarter was negatively impacted by Covid-19, but the stock offers a solid, safe yield
Automatic Data Processing Inc. (NASDAQ:ADP), the largest
provider of business outsourcing solutions in the U.S., held up well during its
most recent quarter. Given the number of jobs that have been lost over the last
quarter to the Covid-19 pandemic, this is a surprising result. At the same
time, Automatic Data Processing offers a yield higher than its historical
average that is well protected by free cash flow.
Let's look closer at Automatic Data Processing to see why
long-term investors should consider buying shares of the company now.
Company background, quarterly highlights and analysis
Automatic Data Processing is composed of two segments:
Employer Services, which provides payroll and tax services, and Professional
Employer Organization Services, which supplies all-inclusive human resources
services to smaller companies. Employer Services account for 70% of revenues,
while the PEO services contributed the rest. Automatic Data Processing works
with more than 700,000 corporate customers around the country. The company is
valued at just under $60 billion as of Tuesday's close.
Automatic Data Processing reported earnings results for the
fourth-quarter and full fiscal year 2020 on July 29 (the company's fiscal year
ends June 30).
Revenues were down 3% to $3.4 billion, though this was $55
million ahead of what Wall Street analysts had expected. Adjusted earnings per
share of $1.14 were flat from the prior year, but 18 cents better than
consensus estimates.
For fiscal 2020, revenue improved 3% to $14.6 billion.
Organic growth was 4% when adjusted for currency exchange rates. Adjusted
earnings per share grew 47 cents, or 8.6%, to $5.92.
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