Anticipated Growth in Automatic Data Processing's Q2 Fiscal 2024 Earnings

As the scheduled date of January 31 approaches for Automatic Data Processing, Inc. (ADP) to announce its earnings for the second quarter of fiscal 2024, expectations are set high. Before the market opens on this date, stakeholders are anticipating the results which could indicate year-over-year improvement in the company's financial performance.

ADP's track record in earnings announcements is remarkable, consistently outperforming analysts' consensus estimates for the last four quarters. With an average earnings surprise at 2.6%, ADP has repeatedly showcased its capability of surpassing expectations.

Projected Growth in Q2

Analysts' projections for ADP's second-quarter revenue stand at $4.66 billion, a 7% increase from the previous year's outcome. Earnings per share estimates indicate a 7.1% growth, reaching $2.1, which is likely driven by solid revenue performance across the company's operations.

Segmental Performance Projections

Projections for ADP's Employer Service revenue are promising, with an expected 7.2% increase to $3.1 billion compared to the same period the previous year. Similarly, expectations for the Professional Employer Organization (PEO) services suggest a 4% revenue increase to $1.56 billion. Additionally, the projected interest on funds held for clients is estimated at $222 million, marking a 4.8% increase year-over-year.

In line with this upward trend, the anticipated number of Average Paid PEO Worksite Employees is set at 731, with a 'Pay per control' change estimated at 2.5% for the upcoming fiscal quarter report.

Earnings Prediction Model Insights

However, despite the optimism, ADP's current position does not fit a model that guarantees an earnings beat this quarter. A positive earnings beat typically aligns with a strong Zacks Rank and a positive Earnings ESP (Expected Surprise Prediction). ADP, with an Earnings ESP of +0.21% coupled with a Zacks Rank of 4 (Sell), falls outside the ideal combination for a predicted earnings beat.

Comparables in the Business Services Sector

In the broader context of the Business Services sector, other companies like Gartner (IT) and Fiserv (FI) are also expected to release earnings data. Gartner, with an anticipated revenue growth of 5.4% and earnings decline of 24.6%, holds a Zacks Rank #2, along with Fiserv which also predicts revenue growth of 7.5% and an increase in earnings predictions of 12.6%, also carries a Zacks Rank #2.

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