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On Thursday, TD Cowen adjusted its price target for ADP (NASDAQ: ADP) shares, increasing it marginally from $290.00 to $294.00, while maintaining a Hold rating on the stock. The price target revision reflects the firm’s recognition of ADP’s consistent performance and strong demand in the Human Capital Management (HCM) sector. With a market capitalization of $123.59 billion, ADP stands as a prominent player in the Professional Services industry, as highlighted by InvestingPro data.
In the second quarter, ADP demonstrated solid execution amid a healthy market for HCM solutions, achieving impressive gross profit margins of 48.23% and maintaining healthy revenue growth of 7.09%. The company’s investment income from its funds held for clients, known as ’float’, showed an increase. Despite facing foreign exchange headwinds, ADP maintained its fiscal year 2025 revenue and earnings per share outlook, suggesting a stable financial forecast.
TD Cowen noted that if not for the FX challenges, ADP’s financial projections for FY25 might have seen modest improvements. The firm has adjusted its model to account for the second quarter performance and revised expectations for the second half of the fiscal year. Analysts at TD Cowen believe there might still be potential for upside in the company’s float income, which differs from ADP’s updated guidance.
The price target is set at 26.5 times the projected earnings for calendar year 2026, indicating a belief in ADP’s consistent execution. Investors who focus on the long term are expected to appreciate ADP’s modernization efforts and developments in products and partnerships. According to InvestingPro analysis, ADP is currently trading above its Fair Value, with a P/E ratio of 31.48x. For deeper insights into ADP’s valuation metrics and 14+ exclusive ProTips, consider exploring the comprehensive Pro Research Report available on InvestingPro.
ADP is slated to host an Investor Analyst Day in June, where further details on its go-to-market strategies and product initiatives are anticipated. This event could provide additional insights into the company’s future plans and operational focus. The company maintains a strong financial health rating of GOOD from InvestingPro, supported by its consistent dividend payments for 52 consecutive years.
In other recent news, Automatic Data Processing (NASDAQ:ADP) reported an 8% increase in organic constant currency revenue and a 10% rise in earnings per share. The company also announced a revenue increase of 6-7% and an EPS growth of 7-9% for the full-year 2025. ADP continues to maintain strong financial health with impressive gross profit margins and moderate debt levels. Stifel analysts maintained a Hold rating on ADP shares, keeping the price target steady at $305.00. Other analyst firms such as Mizuho (NYSE:MFG), Jefferies, BofA Securities, and TD Cowen have also adjusted their price targets for ADP, signifying a positive outlook on the company’s future performance.
In terms of personnel changes, Joseph DeSilva has stepped into the role of Executive Vice President, North America and Chief of Operations, replacing John C. Ayala. Additionally, the company has forged a strategic partnership with Fiserv (NYSE:FI), which is expected to cater to small and medium-sized businesses. Lastly, the ADP® National Employment Report™ reported an increase of 122,000 jobs in the U.S. private sector in December, highlighting the company’s recent momentum in its business operations.
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