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Automatic Data Processing (ADP)
NASDAQ:ADP

Automatic Data Processing (ADP) AI Stock Analysis

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Automatic Data Processing

(NASDAQ:ADP)

Rating:73Outperform
Price Target:
$345.00
â–²(11.87%Upside)
ADP's overall stock score reflects its strong financial performance and positive earnings call sentiment, balanced against mixed technical indicators and a relatively high valuation. The company's robust domestic growth and strategic initiatives are significant strengths, but international challenges could impact future performance.
Positive Factors
Financial Performance
Medium-term targets call for +6-7% y/y revenue growth, 50-75bps of adjusted EBIT margin expansion, and +9-11% y/y adjusted EPS growth.
Market Position
ADP's status as the largest provider of HCM technology in the world gives the company a wide advantage in training agentic functions due to the scale of its data asset.
Product Innovation
ADP highlighted its new ADP Assist AI product, which is being embedded across the product portfolio.
Negative Factors
Cybersecurity Risks
The occurrence of any disruptive cyber incidents could harm ADP’s business or damage its brand and reputation, leading to the loss of existing customers.
Economic Environment
Despite being impressed by the company's innovations, the uncertain unemployment and macroeconomic backdrop contributes to the maintenance of a neutral rating.
Market Competition
Intensifying competition could create downward pressure on product pricing and margins.

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:Apr 30, 2025
(Q3-2025)
|
% Change Since: 4.79%|
Next Earnings Date:Jul 30, 2025
Earnings Call Sentiment Positive
The earnings call reflected a generally positive sentiment with solid financial performance and strategic advancements. While international bookings faced challenges due to macroeconomic uncertainty, the company's domestic segments performed well, and strategic initiatives, such as technology integration and global expansion, showed promising results.
Q3-2025 Updates
Positive Updates
Solid Revenue and Earnings Growth
Achieved 6% revenue growth, 10 basis points of adjusted EBIT margin expansion, and 6% adjusted EPS growth for Q3 2025.
Strong Performance in Employer Services
Employer Services new business bookings showed solid growth, particularly in the U.S. offerings including small business, mid-market, and enterprise.
PEO Revenue Exceeds Expectations
PEO revenue growth of 7% exceeded expectations with strong retention and continued growth in zero-margin pass-throughs.
Successful Integration and Expansion Efforts
Integration with Workforce Software and acquisition of PEI in Mexico strengthened ADP's global payroll capabilities.
Recognition and Awards
ADP received several awards for its technology, including RUN being named number one on G2's Best Software Products for Small Business.
Negative Updates
Soft International Bookings
Experienced softer quarter for international bookings due to macroeconomic uncertainty in key markets.
Challenges in Large Deal Closures
Noted challenges in closing large international deals, attributed to macroeconomic factors and elongated sales cycles.
Company Guidance
In the third quarter of fiscal 2025, ADP reported solid financial performance with a 6% increase in revenue, a 10 basis point expansion in adjusted EBIT margin, and a 6% growth in adjusted EPS. The company experienced strong growth in Employer Services new business bookings, particularly in the U.S., despite international bookings being softer due to macroeconomic uncertainties. ADP maintained its guidance range for overall bookings growth and improved its full-year retention forecast due to high client satisfaction scores and strong retention performance. PEO revenue exceeded expectations with a 7% growth, aided by higher wages and strong retention. Looking forward, ADP adjusted its fiscal 2025 guidance, expecting consolidated revenue growth towards the high end of the 6% to 7% range, and updated its adjusted EBIT margin expansion guidance to 40-50 basis points. For fiscal 2026, ADP anticipates continued growth in client funds and investment yield, despite potential macroeconomic challenges affecting pay per control growth.

Automatic Data Processing Financial Statement Overview

Summary
ADP displays strong financial health with high profitability and efficient cash flow management. The income statement is robust with a net profit margin of 19.8% and revenue growth of 5.2%. The balance sheet reflects a reasonable debt-to-equity ratio of 0.73, though a low equity ratio of 10.4% suggests reliance on liabilities. Cash flow is strong, with a 25.8% growth in free cash flow.
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.
BreakdownTTMJun 2024Jun 2023Jun 2022Jun 2021Jun 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 Debt4.27B3.71B3.34B3.49B3.33B2.35B
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 Price308.40
Price Trends
50DMA
310.55
Negative
100DMA
304.75
Positive
200DMA
297.62
Positive
Market Momentum
MACD
-1.53
Negative
RSI
46.64
Neutral
STOCH
74.91
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 308.4 is above the 20-day moving average (MA) of 307.93, below the 50-day MA of 310.55, and above the 200-day MA of 297.62, indicating a neutral trend. The MACD of -1.53 indicates Negative momentum. The RSI at 46.64 is Neutral, neither overbought nor oversold. The STOCH value of 74.91 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 (58)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
KFKFY
78
Outperform
$3.81B15.9513.49%2.62%-1.23%44.06%
ADADP
73
Outperform
$125.19B31.5776.29%2.00%6.82%9.03%
71
Outperform
$52.47B31.8141.80%2.94%5.56%-1.91%
63
Neutral
$3.47B21.39162.14%1.53%1.50%-44.95%
RHRHI
61
Neutral
$4.21B20.5514.49%5.73%-7.81%-40.22%
58
Neutral
HK$13.89B4.25-3.01%7.32%3.67%-54.16%
NSNSP
57
Neutral
$2.27B36.4548.65%3.98%1.90%-60.33%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
ADP
Automatic Data Processing
306.90
76.96
33.47%
NSP
Insperity
61.41
-22.91
-27.17%
KFY
Korn Ferry
73.81
10.70
16.95%
PAYX
Paychex
144.91
31.16
27.39%
RHI
Robert Half
42.53
-16.06
-27.41%
TNET
TriNet Group
72.12
-24.38
-25.26%

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.

Executive/Board Changes
ADP Appoints Peter J. Hadley as New CFO
Neutral
Apr 30, 2025

On April 28, 2025, Automatic Data Processing, Inc. announced the appointment of Peter J. Hadley as Chief Financial Officer, effective July 1, 2025. Mr. Hadley, who has been with the company in various leadership roles since 2006, will succeed Don McGuire. This leadership change is expected to impact the company’s financial strategies and operations, as Mr. Hadley brings extensive experience from his previous roles within the company. His compensation package includes a base salary, bonuses, and participation in long-term incentive programs, reflecting the company’s commitment to aligning executive compensation with performance and shareholder interests.

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: Jul 05, 2025