On Tuesday, TD Cowen’s analysts, led by Jared Levine, increased their price target on shares of ADP (NASDAQ:ADP) to $290 from $285, while keeping a Hold rating on the stock. According to InvestingPro data, ADP currently trades near $288, with a market capitalization of $118.2 billion. The stock has demonstrated remarkable stability, showing low price volatility and delivering a 25.7% return over the past year. Levine’s analysis suggests a steady performance from ADP, with the expectation that the company will confirm its total revenue and EPS guidance. He anticipates that ADP will exceed Wall Street’s consensus estimates for second-quarter revenue and adjust its EBIT guidance upwards by 10 basis points. This adjustment is attributed to a beneficial higher float and extended duration for the year. The company maintains strong financial health, with InvestingPro highlighting its 26-year streak of dividend increases and impressive 48.1% gross profit margin.
Levine’s commentary acknowledged the changes in the financial landscape since ADP’s last guidance, noting a decrease in the anticipated federal funds rate cuts and a rise in the yield curve from two years onward. These factors are seen as positive for ADP’s float revenue and extended guidance. However, he does not foresee an outright increase in ADP’s projected adjusted EPS growth. Instead, Levine expects ADP to indicate a likelihood of achieving the higher end of its adjusted EPS guidance range, with potential second-half foreign exchange headwinds limiting further growth.
The price target revision to $290 is based on a 26.0 times multiple of the calendar year 2026 estimated P/E, as per Levine’s valuation model. The Hold rating suggests that while there may be positive developments in ADP’s financial performance, the current stock price may already reflect these expectations.
Levine’s stance remains neutral ahead of the company’s earnings report, with a focus on the consistency of ADP’s messaging and the affirmation of its financial guidance amidst market variables. For deeper insights into ADP’s valuation metrics and comprehensive analysis, investors can access the detailed Pro Research Report available on InvestingPro, which includes expert analysis of the company’s current trading multiples and growth prospects.
In other recent news, Automatic Data Processing (NASDAQ:) has reported significant developments. The company showcased a robust first-quarter performance, with a 7% increase in revenue and a 12% rise in earnings per share, exceeding market expectations. This strong performance is attributed to the successful acquisition of WorkForce Software (ETR:) and solid results in the Employer Services and Professional Employer Organization segments.
ADP also announced an executive shakeup, with Joseph DeSilva stepping into the role of Executive Vice President, North America and Chief of Operations, replacing John C. Ayala. In addition, ADP has raised its annual dividend rate, marking its 50th consecutive year of dividend growth, placing the company among the prestigious ‘Dividend Kings’.
Analysts from TD Cowen, Stifel, and RBC Capital have maintained their Hold and Sector Perform ratings on ADP shares, while raising their price targets, reflecting the company’s consistent performance and robust bookings. The company has updated its revenue growth projection for fiscal year 2025 to 6-7%, attributed to the WorkForce Software acquisition and strong first-quarter results. However, the expected improvement in EBIT margin has been revised downward. These are recent developments shaping ADP’s business operations and future trajectory.
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