ADP’s Fourth Quarter 2009
Yesterday ADP announced earnings that were surprisingly good given the level of job losses over the past year. Over the past year, revenue grew by 1% to $8.9 billion for the year. Excluding one-time items, diluted earnings per share from continuing operations grew 10% to $2.39.
ADP produces some of this earnings per share growth by repurchasing shares. ADP acquired 13.8 million shares during the year totaling $550 million. These repurchases are in addition to the $1.28 per share in dividends that ADP pays. A cash flow statement was not included in their earnings release, but net income for the year was $1.33 billion. The company repurchased $550 million in shares and paid dividends of approximately $647 million. They continue to return money to their shareholders.
Employer service revenues were flat year-over-year, and the number of employees on their client payrolls fell by 2.5% for the year. PEO Service revenues grew by 12% for the year. Dealer Service revenues fell by 11% on an organic basis. Overall, Dealer Services totals 15.5% of ADP’s revenues.
Guidance for the coming year anticipates continued economic and employment weakness with earnings per share remaining flat. Following a year of flat earnings per share, ADP would have to grow at a rate of about 8% over the following 5 years to justify its current price.
This is a strong, stable company that could grow faster than 8.0% per year during an economic recovery, but for now it looks like the shares are pretty fairly valued.
Disclosure: I currently own shares of ADP
