Job numbers came in at 163,000 for July, slightly less than the 172,000 jobs added in June. An improving job market is a positive sign for payroll processing firms so lets take a look at the results of the two biggest players:
Automatic Data Processing (ADP) Q4 revenues grew 5.2% over the year to $2.64 billion, marginally shy of the Street’s projections of $2.65 billion. EPS of $0.53 was in line with the market’s targeted EPS and reported growth over previous year’s earnings of $0.48 for the quarter.
By segment, Employer Services’ revenues grew 7% over the year to $1.88 billion, with the number of employees whose payrolls were processed by ADP in the U.S. rising 3.2% over the year. During the quarter, ADP bought back 6.4 million shares of its stock at a cost of $342 million.
ADP ended the year with revenues growing 8% over the year to $10.67 billion and EPS of $2.82. For the year 2013, the company projects revenues and earnings to grow 5%-7% over the year. The market is looking for 8% growth on revenues and 9% growth on earnings.
ADP remains focused on small and medium businesses and continued to expand service offerings for this segment. Recently, the company announced an integration with online accounting software provider, Xero. Through the tie-up, Xero’s general ledger solution will be integrated with ADP’s RUN Powered by ADP payroll platform. ADP’s RUN is a cloud-based solution that delivers compliance tools for payroll, tax administration, and employee management.
The integrated solution is tailored to small business owners. Xero provides SMB owners with real-time visibility into their financial positions. The solution also helps online collaboration with clients, virtual teams, and prospects for accounting professionals. The integration will enable both businesses and accounting professionals to transfer data in a simple and secure manner to Xero’s cloud-based software.
The stock is trading at $57.61 with a market capitalization of $27.99billion. The stock provides a $1.58 dividend = 2.8%. The chart shows ADP pulling back slightly from it’s 52 week high but still in strong uptrend
Paychex (PAYX) Q4 revenues grew 6% over the year to $551.5 million, short of the Street’s projections of $558.0 million. EPS of $0.34 was in line with market expectations and grew 4% over the year.
By segment, payroll service revenues grew 4% to $369.5 million and Human Resource Services revenues grew 12% to $171.2 million.
The company ended the year with revenues up 7% over the year to $2.19 billion and EPS up 6% to $1.51. For the current year, Paychex expects payroll revenues to grow from 3%-4%, just shy of the market’s projected growth of 4.5%.
As part of its expanding product offerings, Paychex recently released a smartphone app for its solutions. The smartphone app for iPhone, Android, and BlackBerry will offer clients and clients’ employees a tool to stay connected to their Paychex payroll, benefits, and retirement information.
Paychex’s closed Friday near it’s one year highs – $33.18, with a market capitalization of $12.04 billion. The stock provides a $1.28 dividend = 3.9% The Chart continues to show a strong uptrend:
