The Rate Scare Is A Tailwind For This One

ADP (ADP) made $1.35 billion last year on money that isn't theirs.

Watch how this works.

When a company runs payroll, ADP collects the funds before they go out to employees and tax authorities. That gap between collection and distribution is a few days, and the average balance sitting there is $41 billion.

They invest it. Yeah, they play the float.

That interest income was up 14% last year and guidance has it going to $1.54 billion this year as yields climb. Against $4.4 billion in net earnings, roughly a third of the bottom line comes from holding somebody else's payroll.

Which makes higher rates a tailwind here instead of a headwind.

And the base business doesn't care about the cycle.

Companies can cut travel and headcount and marketing, but they still have to process payroll.

Last quarter beat and they raised revenue guidance.

The chart had a fast pullback to the 50-day last week, which reset an overbought RSI and opened room overhead.