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On Thursday, RBC Capital Markets sustained their Sector Perform rating on ADP (NASDAQ:ADP) shares, with a steady price target of $315.00. The $118 billion market cap company, currently trading near its InvestingPro Fair Value, has maintained impressive gross profit margins of 48%. RBC Capital’s analysis suggests a possible modest outperformance and a reaffirmation of the company’s FY25 guidance, factoring in slight foreign exchange tailwinds in the fourth quarter of fiscal year 2025. The company has demonstrated solid performance with revenue growth of 7.1% over the last twelve months.
ADP’s retention rate is expected to see a slight decrease, staying within the previously forecasted range of 10-30 basis points. Payments per control are projected to hover around the 1% mark. Average worksite employee growth for ADP’s Professional Employer Organization (PEO) services is predicted to slow down but remain within the 2-3% guidance range. Additionally, a price increase of 100 basis points is anticipated.
The analyst highlighted areas of focus, including the expected revenue acceleration in the fourth quarter of FY25 and sales bookings that are more concentrated in the latter half of the year. These factors are being closely watched in light of current economic uncertainties.
Looking ahead to the preliminary forecast for fiscal year 2026, ADP may indicate a further deceleration in payments per control and ongoing investments, as per RBC Capital’s commentary. This forward-looking statement is based on the firm’s analysis of ADP’s current financial trends and market conditions. With its next earnings report due on April 30, 2025, InvestingPro subscribers can access detailed analysis and 13 additional key insights about ADP’s financial health and growth prospects.
In other recent news, Automatic Data Processing Inc. (ADP) reported a notable 8% increase in revenue for its second quarter of fiscal 2025, surpassing analysts’ expectations. The company also achieved a 10% rise in adjusted earnings per share (EPS), slightly exceeding forecasts. ADP maintained its full-year guidance, projecting consolidated revenue growth of 6-7% and adjusted EPS growth of 7-9%. In strategic developments, ADP announced a partnership with Fiserv (NYSE:FI) to integrate their small business solutions, enhancing their market position. The acquisition of Workforce Software (ETR:SOWGn) is progressing as planned, expected to bolster ADP’s offerings. Additionally, ADP’s Employer Services segment reported record new business bookings, contributing to its overall success. Despite some expected softness in the third quarter due to foreign exchange headwinds, a reacceleration is anticipated in the fourth quarter. The company’s stock showed minimal movement following these announcements, reflecting stable investor sentiment.
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