Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Automatic Data Processing, Inc. (ADP): Bill Ackman Says It Has A Good Chance for Accelerated Revenue Growth

Billionaire Bill Ackman recently shared his thoughts on Automatic Data Processing, Inc. (NASDAQ:ADP) in Pershing Square’s Q1 2019 Investors Letter (track down here). According to him, the company has a good chance to boost its top-line revenue growth and expand margins. Pershing Square also disclosed its quarterly return in the letter, reporting a 36.9% increase of NAV per share.

“Automatic Data Processing, Inc. (“ADP”)

ADP’s 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.”

Michael D Brown/Shutterstock.com

Michael D Brown/Shutterstock.com

Automatic Data Processing, Inc., (ADP) is a $70.44 billion market cap company that provides a variety of professional human resources-related services. It runs through two segments: The Employer Services and Professional Employer Organization. The company was founded back in 1949, and through 2014 it was one of the four American Companies among the S&P 500 to have a AAA credit rating from both Moody’s and Standard & Poor’s. Its headquarters is in Roseland, New Jersey.

Year-to-date, the company’s stock is up by 24.37%, having a closing price of $161.85 on May 24th. ADP is trading at a price-to-earnings ratio of 41.90.

Heading into the first quarter of 2019, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ADP over the last 14 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

The largest stake in Automatic Data Processing (NASDAQ:ADP) was actually held by Pershing Square, which reported holding $533.7 million worth of stock at the end of September. It was followed by Generation Investment Management with a $466.8 million position. Other investors bullish on the company included Cedar Rock Capital, Arrowstreet Capital, and D E Shaw.

ADP

Disclosure: None.

This article is originally published at Insider Monkey.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading...