ADP stock unchanged as RBC maintains sector perform rating

ADP (NASDAQ:ADP) received a reiterated Sector Perform rating from RBC Capital on Friday, with the firm maintaining its $315.00 price target on the human resources technology company. According to InvestingPro data, ADP currently trades at a P/E ratio of 31.7, suggesting the stock may be overvalued relative to its near-term earnings growth potential.

During its Investor Day, ADP announced new midterm targets of 6-7% revenue growth and approximately 50-75 basis points of margin expansion, building on its current revenue growth of 6.82% and impressive gross profit margin of 48.34%. The company outlined plans for shareholder-friendly capital allocation designed to deliver 9-11% earnings per share growth and 11-13% annual total shareholder return. Get deeper insights into ADP’s financial health and growth prospects with a comprehensive Pro Research Report, available exclusively on InvestingPro.

ADP highlighted several strategic priorities and initiatives including ADP Lyric HCM, ADP Assist, and various AI-powered solutions. The company also emphasized its embedded payroll integration with Fiserv (NYSE:FI)’s Clover and Workforce Software (ETR:SOWGn)’s time-tracking capabilities, along with tailored offerings for specific sectors such as construction and restaurants.

The payroll processing giant is pursuing global expansion through acquisitions and partnerships while continuing to invest in artificial intelligence and data capabilities. These investments aim to enhance innovation, client services, and employee experiences across its platform.

RBC Capital analyst Ashish Sabadra maintained the firm’s neutral stance on ADP shares following the company’s presentation of its growth strategy and technology roadmap. With a market capitalization of $125.4 billion and a 26-year track record of consecutive dividend increases, ADP remains a prominent player in the Professional Services industry. InvestingPro subscribers have access to 12 additional key insights about ADP’s financial performance and market position.

In other recent news, Automatic Data Processing (ADP) has announced its updated financial targets, projecting revenue growth of 6-7% and earnings per share growth of 9-11% over the next three to four years. These projections, discussed during ADP’s investor day, exceed the consensus estimates for fiscal 2026/2027. Mizuho (NYSE:MFG) raised its price target for ADP to $332, maintaining an Outperform rating, citing the company’s strong outlook and improvements in product and execution. In contrast, UBS lowered its price target to $315, maintaining a Neutral rating, due to revised growth expectations and valuation concerns.

Additionally, ADP has priced a $1 billion senior notes offering at a 4.75% interest rate, maturing in 2032, with proceeds intended to refinance existing debt and for general corporate purposes. The company also released its National Employment Report, revealing that the U.S. private sector added 37,000 jobs in May, with annual pay increasing by 4.5%. Notably, the service-providing sector led job growth, while the goods-producing sector experienced declines. These developments reflect ADP’s ongoing efforts to manage its capital structure and provide labor market insights.

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