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ADP posts higher 1Q profit despite revenue decline

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The Associated Press 9:41 AM Wednesday, November 4, 2009

ROSELAND, N.J. — Rising unemployment and the struggles of the U.S. auto industry were both evident as payroll and benefits outsourcer Automatic Data Processing Inc. reported a slim 3 percent profit rise inits first quarter. Cost controls offset lower revenue.

The company attributed the revenue decline to the recession, along with unfavorable foreign exchange rates, which ADP said shaved 2 percentage points from the total.

"The actions taken in last year's fourth quarter to reduce our expense structure benefited the current quarter's results," said President and CEO Gary C. Butler. ADP reduced expenses 5 percent from the year-ago quarter to $1.69 billion.

ADP also boosted its guidance for the full fiscal year.

For the three months ended Sept. 30, net income rose to $284.1 million, or 56 cents per share, from $276.9 million, or 54 cents per share, in the year-ago period. There were 2 percent fewer shares outstanding in the most recent period.

Revenue dipped 4 percent to $2.1 billion from $2.18 billion last year.

Analysts polled by Thomson Reuters, on average, expected profit of 50 cents per share, on revenue of $2.05 billion.

The company's largest unit, employer services, which provides payroll processing, saw a 3 percent drop in revenue to $1.49 billion.

ADP said the number of employees on its client's payrolls dropped 6.5 percent, and revenue from its traditional payroll and payroll tax filing business fell 7 percent.

PEO services, its personnel services division, reported a 6 percent revenue increase to $296.2 million.

Revenue dropped 4 percent to $313.5 million for the dealer services unit, which provides information technology services to auto, truck and other vehicle dealers. The decrease was attributed to continued dealership closings and consolidations, but was not as big as expected, ADP said, because of higher transaction volume in August. The company attributed the volume bump to the popular Cash for Clunkers program, noting it did not continue through September.

Itnow expects revenue to fall 1 to 2 percent from fiscal 2009, versus a prior projection of a decline up to 4 percent. Based on last year's total of $8.87 billion, the new forecast implies revenue of $8.69 billion to $8.78 billion.

Wall Street forecast revenue of $8.72 billion for the fiscal year, with estimates ranging from $8.56 billion to $8.93 billion.

The company now expects profit between $2.34 and $2.39 per share, compared with $2.39 last year and a prior range of $2.29 to $2.39.

Analysts, on average, expect earnings of $2.35 per share, with estimates ranging from $2.29 to $2.39.

ADP shares rose 23 cents to $40.88 in morning trading Wednesday. The stock has traded between $31.67 and $41.27 in the past 52 weeks.

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November 04, 2009 02:36 PM EST

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