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UBS lowered its price target on ADP (NASDAQ:ADP) to $315 from $323 while maintaining a Neutral rating following the company’s New York City investor day. With a current market capitalization of $125.73 billion, ADP trades at a P/E ratio of 31.67x, significantly above industry averages according to InvestingPro data.
The firm noted that ADP showcased significant milestones but adjusted its medium-term outlook, revising revenue growth expectations to 6-7% with earnings per share growth of 9-11%, representing a 200 basis point reduction from its 2021 projections. This adjustment aligns with recent trends, as InvestingPro data shows the company achieved revenue growth of 6.82% over the last twelve months.
ADP’s Professional Employer Organization (PEO) segment, which accounts for approximately 35% of revenue, now targets mid-term growth of 6-8%, down from the previous 10-12% forecast set in 2021, contributing to the overall tempered outlook.
UBS acknowledged ADP’s strong competitive positioning in the Human Capital Management market, where the company maintains approximately 15% market share of an expanded $180 billion total addressable market, up from the previous estimate of $175 billion.
The firm remains Neutral on ADP stock, citing valuation concerns as two-year forward multiples trade approximately 15% above historical levels, while continuing to monitor how the company’s technology and distribution investments impact margins.
In other recent news, Automatic Data Processing Inc (ADP) reported strong fiscal third-quarter 2025 earnings, with earnings per share (EPS) of $3.06, surpassing analyst expectations of $2.97. Revenue also exceeded forecasts, reaching $5.55 billion compared to the anticipated $5.49 billion, marking a 6% increase year-over-year. ADP has revised its full-year guidance, now expecting consolidated revenue growth at the high end of the 6-7% range and adjusted EPS growth of 8-9%. In a strategic financial move, ADP has priced a $1 billion senior notes offering at a 4.75% interest rate, maturing in 2032, to refinance existing debt and for general corporate purposes. The company continues to focus on innovation, with the integration of the Lyric HCM Platform and Workforce Software (ETR:SOWGn) driving client acquisition. Analysts have noted a positive outlook for ADP, with firms like BofA Securities and J.P. Morgan involved in the senior notes offering. While ADP’s stock experienced a slight decline despite the earnings beat, the company remains focused on its strategic priorities and market expansion. These developments highlight ADP’s operational efficiency and strategic initiatives in the current economic environment.
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