Analyst Daniel Jester of BMO Capital maintained a Hold rating on Automatic Data Processing, with a price target of $315.00.
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Daniel Jester has given his Hold rating due to a combination of factors influencing Automatic Data Processing’s (ADP) financial performance. The company reported moderate revenue growth in its Employer Services (ES) and Professional Employer Organization (PEO) segments, slightly exceeding expectations. However, the growth in pays per control for ES was weaker than anticipated, raising concerns about the robustness of labor markets and potential revenue growth as the fiscal year progresses.
Despite the revenue outperformance, the company’s margins remained relatively flat, and free cash flow generation fell short of expectations. While ADP maintained its full-year guidance, it adjusted its outlook for ES pays per control to be flat, reflecting a cautious stance. Although ADP’s diverse business lines and strong balance sheet are appealing, the stock is trading at the higher end of its historical price-to-earnings range, prompting a Hold rating as investors await more favorable conditions for potential upside.
In another report released today, Stifel Nicolaus also maintained a Hold rating on the stock with a $290.00 price target.
ADP’s price has also changed moderately for the past six months – from $295.770 to $261.220, which is a -11.68% drop .