ADP profit beats estimates as costs decline

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Automatic Data Processing Inc posted higher-than-expected quarterly earnings on Wednesday as the world's largest payroll processing company cut costs to offset lower sales.

ADP also raised its fiscal 2010 revenue forecast, and its shares climbed 1 percent to $41.06.

Net income from continuing operations climbed to $284 million, or 56 cents a share, in the fiscal first quarter, ended September 30, from $278 million, or 54 cents a share, a year earlier.

Earnings beat analysts' average forecast of 50 cents per share, according to Thomson Reuters I/B/E/S.

Costs decreased 5 percent to $1.7 billion, while revenue fell 4 percent to $2.1 billion. Half of the revenue decline was due to the impact of the strong dollar on international sales, ADP said.

Weak employment and economy continue to hurt near-term growth prospects. However, recent cost actions delivered solid upside surprise, Barclays Capital analyst Gary Bisbee wrote in a note to clients.

In the United States, where ADP processes one in every six payroll payments, revenue from the payroll and payroll tax filing business decreased 7 percent. The number of employees on payrolls of ADP clients fell 6.5 percent on a same-store basis as American firms cut hundreds of thousands of jobs.

Certain market indicators suggest that the U.S. economy has reached the trough of the downturn and has begun to stabilize, Chief Executive Gary Butler said in a statement. However, the economic landscape is still challenging and the timing of the inevitable recovery remains uncertain.

The company raised its revenue forecast for fiscal 2010. It now estimates revenue will fall 1 percent to 2 percent, compared with a previous forecast for a decline of 2 percent to 4 percent.

It forecast 2010 earnings per share of $2.34 to $2.39. Three months ago it forecast $2.29 to $2.39.

What we see from our clients is a bit of cautious optimism, Chief Financial Officer Chris Reidy told Reuters in an interview.

(Reporting by Juan Lagorio; Editing by Derek Caney and John Wallace)

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