Market News

Automatic Data Processing Drops 8.9% Despite Solid Q2 Beat

Shares of Automatic Data Processing, Inc. (NASDAQ: ADP) plunged 8.9% despite reporting solid second-quarter results, which outpaced both earnings and revenue estimates. Meanwhile, its shares have gained 20.7% over the past year. ADP provides human capital management (HCM) solutions.

Solid Results

ADP’s adjusted earnings grew 9% year-over-year to $1.65 per share, surpassing Street estimates of $1.63 per share.

Similarly, revenue increased 9% year-over-year to $4.025 billion, outpacing analyst estimates of $3.98 billion. The revenue growth was aided by a 6% revenue growth in the Employer Services segment and 15% revenue growth in Professional Employer Organization (PEO) services.

CEO Comments

ADP CEO, Carlos Rodriguez, said, “We maintained our momentum in sales, client satisfaction, and client retention during the quarter, reflecting the compelling value proposition ADP continues to provide to our clients during these challenging times.”

Rodriguez added, “As we shared at our recent Investor Day, we see significant opportunity to serve as a partner to employers across the globe, and we remain steadfast in our focus on the years ahead as we advance our products, invest in distribution, and work to make HR simpler for our large and growing base of clients.”

Fiscal 2022 Outlook

Based on the current business momentum, ADP forecasts full-year fiscal 2022 revenue to grow between 8% and 9% and adjusted earnings to grow by 12% to 14%.

Consensus View

Responding to ADP’s solid performance, Mizuho Securities analyst Dan Dolev reiterated a Buy rating on the stock with a price target of $245, which implies 24.1% upside potential to current levels.

Commenting on the results, Dolev said, “Despite fears of many that the re-rise of ADP will see bumps along the road in F2Q22, performance was quite strong… Most notably, management noted ES sales productivity “ahead of pre-pandemic levels” and a “robust” growth outlook whilst “PEO sales performance reflects strong demand environment for outsourcing”.”

Overall, the stock has a Hold consensus rating based on 2 Buys and 6 Holds. At the time of writing, the average Automatic Data Processing price target was $235, which implies 19.01% upside potential to current levels.

Blogger Opinions

According to TipRanks data, financial blogger opinions are 66% Bullish on ADP, marginally lower than a sector average of 69%.

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