ADP price target raised to $318 from $305 at Stifel on strong margins

Investing.com - Stifel raised its price target on ADP (NASDAQ:ADP) to $318.00 from $305.00 on Thursday, while maintaining a Hold rating on the payroll processing company. Currently trading at $314.44, ADP has demonstrated strong momentum with a 20.85% return over the past year. According to InvestingPro analysis, the stock appears to be trading above its Fair Value, with a P/E ratio of 31.3x.

The firm cited ADP’s fourth-quarter performance, which came in slightly above expectations with 6% organic constant currency revenue growth, allowing the company to reach the high end of its annual guidance range of 6-7%.

ADP achieved 40 basis points of margin expansion in the fourth quarter, primarily driven by higher client-float income, which resulted in 8% EPS growth for the quarter and 9% for the full year.

The company reported lower-than-expected fourth-quarter bookings, which grew 3% year-over-year compared to guidance of 4-7%, but this was offset by stronger client retention rates that approached record highs and improved 10 basis points year-over-year.

For fiscal year 2026, ADP provided guidance for mid-single-digit revenue growth and 8-10% EPS growth, which aligns with consensus estimates and reflects a combination of retention, bookings, and pricing trends on the revenue side, along with favorable client-float dynamics impacting margins.

In other recent news, Automatic Data Processing Inc. (ADP) reported its fourth-quarter earnings for fiscal year 2025, surpassing analysts’ expectations. The company achieved an earnings per share (EPS) of $2.26, exceeding the forecasted $2.23. Revenue also exceeded predictions, reaching $5.13 billion compared to the anticipated $5.04 billion. These results highlight ADP’s strong financial performance in the latest quarter. Despite the positive earnings and revenue figures, other factors in the broader market context have influenced investor sentiment. The stock’s movement in the market reflects these external macroeconomic influences. These developments offer valuable insights for investors keeping track of ADP’s financial health and market dynamics.

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