Important: ADP Plunges, Erasing Nearly $6 Billion
NEW YORK (Reuters) - Shares of Automatic Data Processing Inc. (NYSE:ADP - News) were down more than 22 percent on Thursday, a day after the No. 1 U.S. payroll-services company warned of slower profit growth ahead.
ADP's stock was off $9.24 at $32.11 in midday trading on the New York Stock Exchange, erasing nearly $6 billion in market value. Trading was furious, tripling its average daily volume by noon.
ADP has been cutting costs in an effort to minimize the impact of a sluggish economy but has been hurt by rising unemployment and corporate bankruptcies.
The Roseland, New Jersey-based company, which caters to 500,000 businesses, lowered its fiscal 2003 earnings per share growth forecast on Wednesday, when it reported a quarterly profit of $287.3 million.
Prudential Securities analyst Bryan Keane promptly downgraded his rating on ADP to "sell" from "hold," giving investors another reason to sell.
"Cost cutting can no longer overcome the difficult economy and deteriorating fundamentals in its business segments," Keane said in a research note on Thursday. "ADP is plagued by product and market saturation in the payroll market and the dismal brokerage environment."
In its earnings report, ADP said fourth-quarter revenues dipped to $1.85 billion from $1.90 billion in the previous quarter and profit rose 7.5 percent, compared with a 17 percent rise last quarter.
Looking ahead, ADP Chief Executive Arthur Weinbach said he now expects mid single-digit earnings per share growth for fiscal 2003, down from the double-digit growth he forecast in April.
The company's shares have dropped about 30 percent since the start of the year, not including the 22 percent sell-off through midday Thursday. At $32.11, ADP's stock is down about half of its 52-week high of $60.37. |
