UPDATE 2-ADP revenue growth seen slowing, shares fall

Wed Oct 26, 2011 12:22pm EDT

* Q1 EPS $0.61 vs $0.56 last yr

* Q1 rev rises 13 pct

* Sees FY 2012 EPS rising 8-10 pct, rev rising 7-9 pct

* Says U.S. clients' payrolls rose 2.7 pct in Q1

* Shares fall as much as 5 pct

By Brenton Cordeiro

Oct 26 (Reuters) - Automatic Data Processing reported a higher quarterly profit helped by its core employer services segment, but its shares fell as the company's revenue forecast for the year indicated a possible slowdown in growth.

ADP, the world's largest payroll processor, forecast fiscal 2012 earnings to grow 8-10 percent. However, the company, which reported a 13 percent jump in revenue in the first quarter, expects a 7-9 percent revenue growth for the full year.

"Good first quarter, but deceleration ahead," Jefferies' analyst Jason Kupferberg said in a note.

Pays-per-control growth, a key indicator for the company as it reflects the average growth in the number of employees at each ADP client, is expected to grow about 2 percent for the full year.

That number is a slight decrease from the 2.7 percent growth the company reported for the first quarter.

"It's the best indicator that our clients are hiring again," Chief Financial Officer Christopher Reidy told Reuters. "Every industry was up in the first quarter, with the exception of public administration."

Roseland, New Jersey-based ADP caters to over half a million clients, and issues pay checks to 1 out of every 6 Americans.

The national jobless rate currently stands at 9.1 percent.

"Even if unemployment stays where it is or gets slightly better, it's still wind in our back, and it's not a huge driver of our business because a 1 percent change in pays-per-control is worth only $20 million in revenue," Reidy said.

For the first quarter, ADP earned $302.7 million, or 61 cents a share, compared with $278.5 million, or 56 cents a share, a year ago.

Revenue grew 13 percent to $2.52 billion in the quarter, getting a boost from recent acquisitions. Its Employer Services segment revenue climbed 9 percent to $1.75 billion.

"A big part of the 7-9 percent we're forecasting for the year is organic," Reidy said.

Analysts on average had expected the company to earn 61 cents a share, on revenue of $2.44 billion in the first quarter, according to Thomson Reuters I/B/E/S.

ADP, which competes with smaller rival Paychex Inc , said worldwide client retention improved 0.2 percentage points in the quarter.

ADP shares, which have risen about 20 percent since the beginning of this year, were down 3 percent at $50.44 in midday trading on Nasdaq.