How Will ADP Stock React to Completed Spin Off of CDK Global?
BY Kurumi Fukushima
10/01/14 - 02:02 PM EDT|
NEW YORK ( TheStreet) -- Automatic Data Processing Inc. ( ADP) completed the spin off ofCDK Global Inc. ( CDK) this morning.
CDK, which provides technology and marketing services to auto dealers, will start trading on the Nasdaq stock exchange Wednesday. Its ticker symbol is "CDK," the Associated Press reports.
ADP said the spin off will help it focus human resources services business. As part of the spin off, ADP shareholders received one share of CDK stock for every three shares of ADP stock they owned on Sept. 24.
Shares of ADP are slightly lower at $71.61.
Separately, TheStreet Ratings team rates AUTOMATIC DATA PROCESSING as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate AUTOMATIC DATA PROCESSING (ADP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, good cash flow from operations and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
The revenue growth came in higher than the industry average of 12.4%. Since the same quarter one year prior, revenues slightly increased by 9.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
AUTOMATIC DATA PROCESSING has improved earnings per share by 30.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, AUTOMATIC DATA PROCESSING increased its bottom line by earning $3.11 versus $2.79 in the prior year. This year, the market expects an improvement in earnings ($3.52 versus $3.11).
The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the IT Services industry average. The net income increased by 27.2% when compared to the same quarter one year prior, rising from $227.00 million to $288.80 million.
Net operating cash flow has slightly increased to $604.50 million or 5.03% when compared to the same quarter last year. In addition, AUTOMATIC DATA PROCESSING has also modestly surpassed the industry average cash flow growth rate of -1.83%.
39.96% is the gross profit margin for AUTOMATIC DATA PROCESSING which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.39% trails the industry average. |
