Earnings to watch: ADP (ADP) reports Q3 results tomorrow

What happened

Automatic Data Processing, a payroll and HR services provider, will report its quarterly results Wednesday before the market opens. Last quarter it reported revenue of $5.47 billion, up 6.8% year on year, and beat analysts' revenue and earnings-per-share estimates.

Confirmed

Global impact / market context

Investors expect ADP's revenue to grow 5.7% year on year, slower than the 7.1% increase in the same quarter last year. A miss could weaken confidence in the company's steady growth, while a beat would support its record of exceeding Wall Street expectations.

Analyst inference

Peers SS&C and Equifax already reported revenue growth of 7.8% and 9.6%, respectively, in line with expectations, yet their shares moved in opposite directions after results. This suggests that meeting estimates alone may not determine how ADP's stock reacts.

Analyst inference

What to watch

1. Whether ADP's revenue growth reaches the 5.7% year-on-year pace that the market expects, compared with the 7.1% increase reported in the same quarter last year. Confirmed
2. Whether ADP extends its history of exceeding Wall Street expectations, as analysts have reconfirmed their estimates over the last 30 days, indicating they anticipate the business will stay the course. Proposed
3. How ADP's shares react to results, given that peer SS&C fell 7.3% while Equifax rose 10.7% after reporting revenue in line with estimates. Analyst inference

Evidence

• stockstory.org