Earnings Preview: Automatic Data Processing

Automatic Data Processing (ADP) is expected to report Q1 earnings after market close Monday Nov. 3, with a conference call scheduled for 4:45pm ET.

Guidance

The consensus estimate is 50c for EPS and $2.14B for revenue, according to First Call.

Analyst Views

Thomas Weisel is projecting Q1 revenue and EPS of $2.07B and 49c. Although ADP does not provide quarterly guidance, the firm offered FY09 guidance on their last earnings call of EPS growth of 10% to 14%, and revenue growth of 7% to 9%. That translates to EPS of $2.40 to $2.49, and revenue of $9.39B to $9.48B. Weisel says key quarterly items are the investment portfolio's exposure to securities that have suffered losses in value and any potential adjustments to its outlook, as well as expectations about payroll growth. The firm says about 45% of the investment portfolio is invested in corporate bonds and asset backed securities, some of which could have become impaired during the quarter. Last month Weisel lowered their FY09 estimates below consensus to $9.03B and $2.28, to reflect deteriorating economic conditions, declining employment trends and the impact of recent reductions to interest rates.

Key issues for the conference call: forward guidance, the company's investment portfolio, expectations of growth in employment, changes in interest rates, and the search for a new COO.