BofA raises ADP stock price target to $315, keeps neutral rating

On Wednesday, BofA Securities analyst Jason Kupferberg updated the firm’s outlook on ADP (NASDAQ:ADP), increasing the price target from $306.00 to $315.00 while maintaining a Neutral rating on the stock. The $124.2 billion market cap company is currently trading near its 52-week high of $309.63, with a year-to-date return of 1.91%. Kupferberg acknowledged ADP’s strong performance in its fiscal second quarter, noting revenue outperformance in both the Employer Services (ES) and Professional Employer Organization (PEO) segments, as well as a $0.07 earnings per share (EPS) beat compared to BofA’s forecast.

Despite the positive earnings report, ADP’s forecast for fiscal year 2025 was reiterated, excluding float income, due to certain favorable conditions in the second quarter. InvestingPro data shows the company maintaining strong fundamentals with a 6.63% revenue growth and an impressive track record of 26 consecutive years of dividend increases. The company anticipates some headwinds in the second half of the fiscal year, especially in the third quarter, which may include factors such as foreign exchange (FX) fluctuations, lower short-term interest rates, and increased costs related to acquisition integration.

In light of these challenges, Kupferberg expressed surprise at the stock’s rally of 3-4% following the earnings report. The analyst pointed out that with the shares trading at approximately 28 times fiscal year 2026 price-to-earnings (P/E), the decision to maintain a Neutral rating seems warranted. According to InvestingPro analysis, the stock appears overvalued, currently trading at a P/E ratio of 32.42x and offering a dividend yield of 2.06%. For deeper insights into ADP’s valuation and 12+ additional ProTips, consider accessing the comprehensive Pro Research Report.

ADP remains positive about the macroeconomic environment, although it has indicated a deceleration in the pace of hiring. Additionally, the company has announced a new partnership with Fiserv (NYSE:FI). As a prominent player in the Professional Services industry, ADP maintains a strong financial health score according to InvestingPro metrics. This collaboration will integrate ADP’s RUN platform with Fiserv’s Clover and Cash Flow Central, offering enhanced services to small and medium-sized businesses (SMBs) in the United States.

In other recent news, Automatic Data Processing (ADP) has made significant strides in its performance and strategic moves. ADP reported a robust first quarter performance, showcasing a 7% increase in revenue and a 12% rise in earnings per share (EPS), surpassing market expectations. This performance was attributed to the successful acquisition of WorkForce Software (ETR:SOWGn) and strong results in the Employer Services and Professional Employer Organization segments. ADP also raised its annual dividend rate by $0.14, marking its 50th consecutive year of dividend growth. This achievement places ADP among the prestigious ’Dividend Kings’, a select group of companies with a history of increasing dividends for at least five decades.

Additionally, the U.S. private sector saw an increase of 122,000 jobs in December, as reported by the ADP® National Employment Report™. This independent assessment of the labor market is a collaborative effort between ADP Research and the Stanford Digital Economy Lab. Also, analysts from TD Cowen, led by Jared Levine, increased their price target on shares of ADP to $290 from $285, while keeping a Hold rating on the stock.

In terms of executive changes, John C. Ayala, the current Chief Operating Officer, is set to leave his role, and Joseph DeSilva, currently President of Global Sales at ADP, will step into the role of Executive Vice President, North America and Chief of Operations. These are recent developments shaping ADP’s business operations and future trajectory.

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