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Automatic Data Processing (ADP)
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Automatic Data Processing (ADP) AI Stock Analysis

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ADP

Automatic Data Processing

(NASDAQ:ADP)

Rating:76Outperform
Price Target:
$339.00
â–²(12.83%Upside)
ADP's overall stock score is bolstered by its strong financial performance and positive earnings call outlook, highlighting robust revenue growth and strategic investments. Technical analysis indicates some bearish trends, while high valuation metrics are offset by a reasonable dividend yield. The company's ability to manage costs efficiently and invest in growth initiatives contributes positively to its future prospects.
Positive Factors
Financial Performance
ADP delivered broad-based F4Q25 top-line results across both Employer Services and PEO, with profitability at least partially aided by materially higher-than-expected contribution from ADP's differentiated laddered client funds interest strategy.
Growth Strategy
ADP has built an engine to drive at least 6% annual growth at scale with a mix of new bookings, pricing, upsell around services, and steady retention.
Market Position
ADP is the market share leader in payroll and PEOs, offering products and services across many key use cases for small- and medium-sized businesses to manage HR-related tasks, which contributes to its strong competitive position.
Negative Factors
Booking Performance
The one source of softness on the quarter came down to bookings, with delayed decision making in the domestic HR outsourcing business, which tends to skew towards the upper-end of the middle market and low-end of enterprise, and is thereby subject to longer sales cycles.
Competitive Pressure
Intensifying competition could create downward pressure on product pricing.
Valuation Concerns
Shares are trading at the high end of their historical P/E range, leaving analysts looking for a more attractive entry.

Automatic Data Processing (ADP) vs. SPDR S&P 500 ETF (SPY)

Automatic Data Processing Business Overview & Revenue Model

Company DescriptionAutomatic Data Processing (ADP) is a leading provider of human resources management software and services. Headquartered in Roseland, New Jersey, ADP operates in sectors such as payroll, human resources, and benefits administration. The company offers a wide range of solutions tailored for businesses of all sizes, including payroll processing, talent management, tax and compliance services, and time and attendance solutions.
How the Company Makes MoneyADP generates revenue primarily through its comprehensive suite of human capital management solutions. The company's key revenue streams include fees from payroll processing, where ADP charges businesses for managing employee payrolls, and subscriptions to its HR management software. ADP also earns money through its benefits administration services, where it provides tools and services for managing employee benefits programs. Additionally, ADP gains revenue from tax and compliance services, assisting businesses in adhering to various regulatory requirements. The company engages in various partnerships to enhance its product offerings, such as collaborations with financial institutions for payroll-related services and integrations with other software providers. These partnerships, along with a broad client base across different industries, contribute significantly to ADP's earnings.

Automatic Data Processing Key Performance Indicators (KPIs)

Any
Any
Revenue by Segment
Revenue by Segment
Analyzes income from different business units, highlighting which areas drive growth and profitability, and indicating strategic focus and market positioning.
Chart InsightsADP's Employer Services segment is experiencing robust growth, driven by strong U.S. business bookings and strategic initiatives, despite international challenges. PEO Services also exceeded expectations with a 7% revenue increase, supported by high retention and wage growth. The 'Other' segment remains volatile but less impactful. The earnings call highlights solid financial performance and strategic advancements, with ADP adjusting its fiscal 2025 guidance to reflect high-end revenue growth expectations. However, international bookings face headwinds due to macroeconomic uncertainties, potentially affecting future growth.
Data provided by:Main Street Data

Automatic Data Processing Earnings Call Summary

Earnings Call Date:Jul 30, 2025
(Q4-2025)
|
% Change Since: -2.66%|
Next Earnings Date:Oct 22, 2025
Earnings Call Sentiment Positive
ADP reported a strong fiscal 2025 with significant achievements in revenue growth, retention rates, and product innovation. However, challenges remain in meeting new business bookings expectations and navigating a moderating macroeconomic environment. The outlook for fiscal 2026 remains positive, with continued strategic investments and growth initiatives.
Q4-2025 Updates
Positive Updates
Strong Fourth Quarter Performance
ADP closed fiscal 2025 with 8% revenue growth, 40 basis points of adjusted EBIT margin expansion, and 8% adjusted EPS growth.
Record Employer Services Retention
Employer Services retention increased 10 basis points to 92.1% for the year, approaching a record-high of 92.2%.
PEO New Business Bookings Acceleration
PEO new business bookings growth accelerated in the fourth quarter, contributing to fiscal 2025 PEO revenue growth of 7% at the high end of expectations.
Successful Product Launches and AI Integration
ADP Lyric HCM clients increased by over 50% in fiscal 2025. AI tools like ADP Assist have been integrated, enhancing productivity and client engagement.
Fiscal 2026 Positive Outlook
ADP expects fiscal 2026 revenue growth of 5% to 6% and adjusted EPS growth of 8% to 10%, supported by continuous investments and strategic initiatives.
Negative Updates
Underperformance in Employer Services Bookings
Employer Services new business bookings grew by 3%, below expectations, due to a softer finish in HR Outsourcing and earlier international softness.
Moderation in Macro Environment
The macroeconomic environment is expected to continue its slight moderation, impacting pays per control growth and retention rates.
Ongoing Margin Pressures
PEO margins contracted by 20 basis points in the quarter and are expected to decrease in fiscal 2026 due to zero-margin pass-throughs and higher costs.
Company Guidance
During ADP's Fourth Quarter Fiscal 2025 earnings call, the company reported an 8% increase in revenue, a 40 basis point expansion in adjusted EBIT margin, and an 8% growth in adjusted EPS for the quarter. For the full fiscal year, ADP achieved 7% revenue growth, a 50 basis point improvement in adjusted EBIT margin, and a 9% rise in adjusted EPS. Employer Services new business bookings reached approximately $2.1 billion, reflecting a 3% growth, despite being below expectations due to a softer finish in HR Outsourcing and international bookings. Employer Services retention exceeded expectations, increasing by 10 basis points to 92.1%. The PEO segment saw a 7% revenue growth, with average worksite employees growing by 3%. For fiscal 2026, ADP anticipates 5% to 6% growth in consolidated revenue and 50 to 70 basis points of adjusted EBIT margin expansion, with an expected adjusted EPS growth of 8% to 10%. The company plans to continue investing in strategic priorities, including its AI initiatives and the integration of recent acquisitions like WorkForce Software.

Automatic Data Processing Financial Statement Overview

Summary
ADP demonstrates strong financial performance with a robust Gross Profit Margin and high Net Profit Margin, indicating efficient cost management and profitability. The company shows solid revenue growth and impressive returns on equity, although the low equity ratio suggests a potential risk of over-reliance on liabilities.
Income Statement
85
Very Positive
ADP's income statement shows a robust financial performance with a strong Gross Profit Margin of 47.1% for TTM, indicating efficient cost management. The Net Profit Margin stands at 19.8%, reflecting profitability. Revenue growth is solid at 5.2% from the previous year, showcasing positive business momentum. EBITDA and EBIT margins are strong at 30.6% and 17.4%, respectively, signaling operational efficiency.
Balance Sheet
78
Positive
The balance sheet reveals a manageable Debt-to-Equity Ratio of 0.73, indicating balanced leverage. Return on Equity is impressive at 68.3%, highlighting effective use of shareholders' capital. However, the Equity Ratio is relatively low at 10.4%, suggesting a higher reliance on liabilities.
Cash Flow
80
Positive
ADP's cash flow statement demonstrates strong cash generation capabilities with a Free Cash Flow growth of 25.8% over the previous period. The Operating Cash Flow to Net Income Ratio is 1.2, indicating strong cash earnings. The Free Cash Flow to Net Income Ratio stands at 1.1, reflecting efficient cash conversion.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue20.20B19.20B18.01B16.50B15.01B14.59B
Gross Profit9.51B8.73B8.06B7.04B6.37B6.14B
EBITDA6.18B5.80B5.24B4.41B3.93B3.77B
Net Income4.00B3.75B3.41B2.95B2.60B2.47B
Balance Sheet
Total Assets56.45B54.36B50.97B63.07B48.77B39.17B
Cash, Cash Equivalents and Short-Term Investments2.68B2.91B2.10B1.47B2.58B1.91B
Total Debt4.27B3.71B3.44B3.49B3.35B2.35B
Total Liabilities50.59B49.82B47.46B59.84B43.10B33.41B
Stockholders Equity5.86B4.55B3.51B3.23B5.67B5.75B
Cash Flow
Free Cash Flow4.52B3.59B3.64B2.55B2.59B2.41B
Operating Cash Flow4.80B4.16B4.21B3.10B3.09B3.03B
Investing Cash Flow-3.68B-1.39B-2.52B-7.01B-3.52B3.16B
Financing Cash Flow-13.03B-1.43B-15.68B13.65B6.44B-5.89B

Automatic Data Processing Technical Analysis

Technical Analysis Sentiment
Negative
Last Price300.44
Price Trends
50DMA
310.36
Negative
100DMA
304.26
Negative
200DMA
300.18
Positive
Market Momentum
MACD
-0.35
Negative
RSI
41.56
Neutral
STOCH
47.83
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ADP, the sentiment is Negative. The current price of 300.44 is below the 20-day moving average (MA) of 304.86, below the 50-day MA of 310.36, and above the 200-day MA of 300.18, indicating a neutral trend. The MACD of -0.35 indicates Negative momentum. The RSI at 41.56 is Neutral, neither overbought nor oversold. The STOCH value of 47.83 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ADP.

Automatic Data Processing Risk Analysis

Automatic Data Processing disclosed 16 risk factors in its most recent earnings report. Automatic Data Processing reported the most risks in the "Tech & Innovation" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Automatic Data Processing Peers Comparison

Overall Rating
UnderperformOutperform
Sector (50)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
77
Outperform
$50.20B30.4441.80%2.96%5.56%-1.91%
76
Outperform
$121.96B30.1076.00%2.00%7.07%9.66%
72
Outperform
$3.59B15.0113.49%2.46%-1.23%44.06%
68
Neutral
$3.08B21.61139.13%1.66%1.39%-50.47%
61
Neutral
$3.61B20.1912.75%6.34%-6.95%-41.84%
55
Neutral
$1.70B43.3731.50%5.33%2.40%-75.66%
50
Neutral
C$3.12B5.31-49.27%9.09%2.78%-10.97%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
ADP
Automatic Data Processing
300.44
47.54
18.80%
NSP
Insperity
45.07
-44.89
-49.90%
KFY
Korn Ferry
69.05
3.64
5.56%
PAYX
Paychex
139.34
19.03
15.82%
RHI
Robert Half
35.34
-24.71
-41.15%
TNET
TriNet Group
63.30
-31.91
-33.52%

Automatic Data Processing Corporate Events

Private Placements and FinancingBusiness Operations and Strategy
Automatic Data Processing Secures $7.05 Billion Credit Agreements
Neutral
Jun 27, 2025

On June 27, 2025, Automatic Data Processing, Inc. entered into new credit agreements totaling $7.05 billion, replacing previous facilities. These agreements, which include a $4.55 billion 364-Day Facility and a $2.5 billion Five-Year Facility, are designed to enhance the company’s financial flexibility and support general corporate purposes. The new facilities, led by major financial institutions, offer revolving credit options and include terms similar to the previous agreements, with customary covenants and events of default. The agreements reflect ADP’s strategic financial management and its ongoing relationships with key lenders, potentially impacting its operational capabilities and market positioning.

The most recent analyst rating on (ADP) stock is a Sell with a $285.00 price target. To see the full list of analyst forecasts on Automatic Data Processing stock, see the ADP Stock Forecast page.

Business Operations and Strategy
Automatic Data Processing to Host 2025 Investor Day
Neutral
Jun 12, 2025

Automatic Data Processing, Inc. announced it will host its 2025 Investor Day on June 12, 2025, in New York, with a presentation starting at 9:00 am ET. The event will be webcast live on the company’s website, offering stakeholders insights into the company’s strategic direction and operational focus, potentially impacting its market positioning and investor relations.

The most recent analyst rating on (ADP) stock is a Sell with a $285.00 price target. To see the full list of analyst forecasts on Automatic Data Processing stock, see the ADP Stock Forecast page.

Private Placements and FinancingRegulatory Filings and Compliance
Automatic Data Processing Issues $1 Billion in Senior Notes
Neutral
May 8, 2025

On May 5, 2025, Automatic Data Processing, Inc. entered into an Underwriting Agreement with major financial institutions to issue and sell $1 billion in senior notes due 2032, with a 4.750% interest rate. The issuance, registered with the SEC, reflects the company’s strategic financial maneuver to potentially strengthen its capital structure and support its operational growth.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Aug 02, 2025