Benzinga | Jan 26, 2021 10:22AM EST

Earnings Outlook for Automatic Data Processing

Automatic Data Processing (NASDAQ:ADP) announces its next round of earnings this Wednesday, January 27. Here is Benzinga's everything-that-matters guide for this Wednesday's Q2 earnings announcement.

What Are Earnings, Net Income, And Earnings Per Share?

Earnings and especially earnings per share (EPS) are useful measures of a company's profitability. Total earnings, which is also referred to as net income, equals total revenue minus total expenses. EPS equals to net income divided by the number of shares outstanding.

Earnings And Revenue

Based on management's projections, Automatic Data Processing analysts model for earnings of $1.29 per share on sales of $3.57 billion. Automatic Data Processing EPS in the same period a year ago totaled $1.52. Revenue was $3.67 billion.

What Are Analyst Estimates And Earnings Surprises, And Why Do They Matter?

Wall Street analysts who study this company will publish analyst estimates of revenue and EPS. The averages of all analyst EPS and revenue estimates are called the "consensus estimates"; these consensus estimates can have a significant effect on a company's performance during an earnings release. When a company posts earnings or revenue above or below a consensus estimate, it has posted an "earnings surprise", which can really move a stock depending on the difference between actual and estimated values.

If the company were to match the consensus estimate, earnings would be down 15.13%. Revenue would be down 2.72% on a year-over-year basis. Here is how the company's reported EPS has compared to analyst estimates in the past:

Quarter Q1 2020 Q4 2020 Q3 2020 Q2 2020EPS Estimate 0.98 0.96 1.89 1.45EPS Actual 1.41 1.14 1.92 1.52Revenue Estimate 3.28 B 3.29 B 4.03 B 3.69 BRevenue Actual 3.47 B 3.38 B 4.05 B 3.67 B

Stock Performance

Over the past 52-week period, shares of Automatic Data Processing have declined 3.4%. Given that these returns are generally negative, long-term shareholders are probably a little upset going into this earnings release.

Do not be surprised to see the stock move on comments made during its conference call. Automatic Data Processing is scheduled to hold the call at 08:30:00 ET and can be accessed here.