Automatic Data Processing Inc. (ADP), a provider of human resources and payroll services, announced the acquisition of privately held AdvancedMD. Terms and conditions of the deal were not disclosed.
Utah-based AdvancedMD provides practice management (PM) and electronic health records (EHR) solutions and has more than 300 billing partners across the United States. AdvancedMD’s cloud-based electronic solutions are being used by more than 10,000 physicians including 4,100 medical practitioners.
Currently, Automatic Data Processing’s Small Business Service caters to more than 45,000 physicians including approximately 13,500 small to mid-sized medical practitioners. The company provides them with a plethora of integrated services such as human resource and payroll services.
Automatic Data Processing is expected to widen its presence in the small business services segment through this acquisition. The company expects to integrate AdvancedMD’s PM and EHR solutions into its full set of services in order to serve medical professionals.
Automatic Data Processing has been on an acquisition spree over the last 12 months. The company acquired digital marketing solutions provider, Cobalt in August 2010 for approximately $405.0 million in cash.
In October 2010, Automatic Data Processing acquired MasterTax, a provider of payroll tax and compliance software and services for an undisclosed sum. In the second half of fiscal 2010, ending December 31, Automatic Data Processing announced to acquire five businesses for $183.8 million in cash. Of these three were closed in the most recent quarter (second quarter) of 2011.
The company reported second quarter 2011 revenue of $2.40 billion, up 9.0% including acquisitions on a year-over-year basis. Organic revenue growth was 5.0%.
During the quarter, Automatic Data Processing reported earnings per share (EPS) of 62 cents in the quarter, beating the Zacks Consensus Estimate by a penny. For the fiscal year 2011, Automatic Data Processing expects EPS to increase 5.0% from $2.37 in fiscal 2010, assuming no dilution to 2011 earnings from acquisitions closed to date. The Zacks Consensus Estimate is currently pegged at $2.50.
For fiscal year 2011, total revenue is expected to increase 5.0% year over year, up from the prior growth rate of 3.0% to 5.0%. Including acquisitions, the growth is expected to be 9.0%, up from the prior forecast of 7.0% to 8.0%. The Zacks Consensus Estimate for revenue is currently pegged at $9.69 billion.
Automatic Data Processing faces stiff competition from Paychex Inc. (PAYX) and Administaff Inc. (ASF).
Over the long term we remain Neutral on the stock, based on the strong 2011 outlook, which suggests a positive second half, driven by higher client retention and revenue growth from new business.
Automatic Data Processing currently has a Zacks #3 Rank, which translates into a Hold rating over the short term.
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