Automatic Data Processing Q2 Earnings Top Estimates, Revenues Rise Y/Y

Automatic Data Processing, Inc. ADP has reported impressive second-quarter fiscal 2026 results, wherein earnings and revenues outpaced the Zacks Consensus Estimate.

ADP’s earnings per share of $2.62 beat the consensus estimate by 1.6% and increased 11.5% from the year-ago quarter. Total revenues of $5.4 billion missed the consensus estimate by a slight margin but grew 6.2% on a year-over-year basis.

The ADP stock has declined 12.8% in the past year compared with the industry’s 4.1% dip and the 19.1% rise of the Zacks S&P 500 Composite.

ADP’s Segmental Results

Employer Services’ revenues of $3.6 billion increased 6% on a reported basis and 5% on an organic constant-currency basis, surpassing the Zacks Consensus estimate of $3.3 billion. Pays per control increased 1% with the year-ago quarter.

PEO Services’ revenues gained 6% from the year-ago quarter to $1.8 billion and beat the consensus mark of $1.7 billion. Average worksite employees paid by PEO Services were 758,000, rising 2% from the year-ago quarter.

Interest on funds held for clients grew 13% from the year-ago quarter to $309 million and missed the consensus estimate of $310.2 million. ADP’s average client funds balance rose 6% to $37.6 billion. The average interest yield on client funds expanded 20 basis points (bps) to 3.3%.

Automatic Data Processing’s Margins

Adjusted EBIT increased 10% on a year-over-year basis to $1.4 billion. The adjusted EBIT margin gained 80 bps to 26%.

The margin of Employer Services decreased 50 bps, while PEO Services dipped 70 bps from the year-ago quarter.

Balance Sheet & Cash Flow of ADP

Automatic Data Processing exited second-quarter fiscal 2026 with cash and cash equivalents of $2.4 billion compared with $2.5 billion at the end of the preceding quarter. The long-term debt of $4 billion remained flat with the preceding quarter.

The company generated $1.1 billion in cash from operating activities in the quarter.

Automatic Data Processing’s FY26 Outlook

For fiscal 2026, ADP expects year-over-year revenue growth of 6% compared with the preceding quarter’s projection of 5-6%. The adjusted EPS growth guidance is kept at 9-10% compared with the 8-10% provided in the first quarter of fiscal 2026. The adjusted effective tax rate is estimated to be 23%. The guidance for the adjusted EBIT margin is 50-70 bps.

Automatic Data Processing’s Employer Services’ revenue growth expectations are at 6% compared with the 5-6% provided in the preceding quarter. For PEO Services, revenue growth is kept at 5-7%.

ADP carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Snapshot

Accenture plc ACN reported impressive first-quarter fiscal 2026 results.

ACN’s earnings were $3.94 per share, beating the Zacks Consensus Estimate by 5.6%. The metric increased 9.8% from the year-ago quarter. Total revenues of $18.7 billion beat the consensus estimate by 1% and rose 6% on a year-over-year basis.

Paychex, Inc. PAYX posted impressive second-quarter fiscal 2026 results.

PAYX’s fiscal second-quarter earnings of $1.26 per share beat the Zacks Consensus Estimate by 1.6% and increased 10.5% from the year-ago quarter. Total revenues of $1.6 billion surpassed the consensus estimate by a slight margin and rallied 18.3% from the year-ago quarter.

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This article originally published on Zacks Investment Research (zacks.com).

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