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Holly LaFon
Holly LaFon
Articles (9686)  | Author's Website |

Bill Ackman Comments on ADP

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May 17, 2019 | About:

ADP’s (NASDAQ:ADP) fiscal third quarter earnings results continue to highlight the significant opportunity for accelerated revenue growth and improved prospective profitability. ADP reported 4% revenue growth (5% organic constant-currency), 10% growth in adjusted operating profit (aided by 130 basis points of margin expansion), and 13% growth in adjusted EPS. While revenue growth was somewhat softer than recent prior quarters, ADP’s bookings growth – a leading indicator of future revenue growth – jumped to 10%, a significant acceleration from previous periods.

ADP continued to execute on its ongoing business transformation in the quarter by generating better-than-expected Employer Services operational margins which increased 170 basis points during the quarter. These improved margins are particularly notable despite the quarter’s bookings growth acceleration, which would typically cause margins to decline principally due to the upfront selling costs associated with new bookings. In response to better-than-expected margin expansion, ADP once again increased its fiscal year 2019 earnings-per-share guidance by 19% to 20% over the previous year.

ADP shares have appreciated 21% year-to -date. We continue to believe that ADP has a significant opportunity to accelerate top-line revenue growth and expand margins, which should allow ADP to compound earnings at a mid-to-high-teens growth rate for many years to come.

From Bill Ackman (Trades, Portfolio)'s first-quarter 2019 Pershing Square shareholder letter.

About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

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