Automatic Data Processing (NASDAQ:ADP) Posts Quarterly Earnings Results, Beats Expectations By $0.05 EPS

Automatic Data Processing (NASDAQ:ADP) issued its quarterly earnings data on Wednesday. The business services provider reported $2.64 EPS for the quarter, beating analysts’ consensus estimates of $2.59 by $0.05, FiscalAI reports. Automatic Data Processing had a return on equity of 71.34% and a net margin of 20.11%.The business had revenue of $5.47 billion for the quarter, compared to analyst estimates of $5.44 billion. During the same quarter in the prior year, the firm posted $2.26 EPS. The firm’s revenue for the quarter was up 6.8% on a year-over-year basis. Automatic Data Processing updated its FY 2027 guidance to 12.120-12.340 EPS.

Here are the key takeaways from Automatic Data Processing’s conference call:

• Strong fiscal 2026 performance: ADP reported fourth-quarter revenue growth of 7%, adjusted EBIT margin expansion of 140 basis points, and adjusted EPS growth of 17%. Full-year results also landed at the high end of updated guidance, with $21.9 billion in revenue and 11% adjusted EPS growth.
• Employer Services bookings rose 6% to more than $2.2 billion, while retention remained near record levels at 92.1% and client satisfaction reached a third consecutive annual record. Management cited broad-based demand across small business, enterprise, international, outsourcing, and retirement offerings.
• ADP highlighted rapid adoption of its AI capabilities: ADP Assist is available to nearly all of its more than 1.1 million clients, while its Zone platform expanded to 48% of the service workforce and contributed to lower contacts per client and improved productivity. Management expects further efficiency and margin benefits as deployment expands.
• For fiscal 2027, ADP guided to consolidated revenue growth of 5%–6%, adjusted EBIT margin expansion of 70–90 basis points, and adjusted EPS growth of 9%–11%. The outlook assumes broadly stable economic conditions, flat-to-1% U.S. pays-per-control growth, a slight foreign-exchange headwind, and continued growth in client funds interest revenue.
• PEO margins contracted in fiscal 2026 and are expected to decline further in fiscal 2027 as zero-margin pass-through revenue grows faster than total PEO revenue, with higher healthcare, workers’ compensation, and selling expenses also weighing on profitability. Employer Services retention is likewise expected to decline modestly by 10–30 basis points from the near-record 92.1% level.

Automatic Data Processing Trading Down 3.5%

Shares of ADP stock opened at $263.87 on Friday. The company has a market capitalization of $105.48 billion, a P/E ratio of 24.12 and a beta of 0.83. Automatic Data Processing has a 12-month low of $188.16 and a 12-month high of $315.26. The firm has a 50-day moving average price of $235.06 and a 200 day moving average price of $224.30. The company has a quick ratio of 1.04, a current ratio of 1.05 and a debt-to-equity ratio of 0.82.

Wall Street Analyst Weigh In

Several brokerages have commented on ADP. Cantor Fitzgerald increased their price target on Automatic Data Processing from $244.00 to $295.00 and gave the company an “overweight” rating in a report on Wednesday, July 22nd. TD Cowen upped their price objective on shares of Automatic Data Processing from $216.00 to $223.00 and gave the stock a “hold” rating in a report on Monday, July 6th. Jefferies Financial Group lowered their target price on shares of Automatic Data Processing from $230.00 to $190.00 in a research note on Thursday, April 30th. Stifel Nicolaus lifted their target price on shares of Automatic Data Processing from $260.00 to $285.00 and gave the stock a “hold” rating in a report on Thursday. Finally, UBS Group raised their price objective on shares of Automatic Data Processing from $260.00 to $270.00 and gave the stock a “neutral” rating in a research note on Wednesday, July 22nd. Three equities research analysts have rated the stock with a Buy rating, nine have issued a Hold rating and one has given a Sell rating to the company’s stock. According to data from MarketBeat.com, the stock has a consensus rating of “Hold” and an average price target of $272.43.

Hedge Funds Weigh In On Automatic Data Processing

Large investors have recently modified their holdings of the stock. Imprint Wealth LLC bought a new position in Automatic Data Processing in the 3rd quarter valued at $25,000. Prosperity Bancshares Inc acquired a new position in shares of Automatic Data Processing during the fourth quarter valued at $33,000. Wilkerson Advisory Group LLC bought a new position in Automatic Data Processing in the fourth quarter valued at about $36,000. Wealth Watch Advisors INC bought a new position in Automatic Data Processing in the third quarter valued at about $43,000. Finally, Kemnay Advisory Services Inc. acquired a new stake in Automatic Data Processing in the fourth quarter worth about $41,000. 80.03% of the stock is currently owned by institutional investors and hedge funds.

Automatic Data Processing News Summary

Here are the key news stories impacting Automatic Data Processing this week:

• Positive Sentiment: Quarterly results exceeded expectations. ADP reported fiscal Q4 earnings of $2.64 per share versus the $2.59 consensus estimate, while revenue reached $5.47 billion, ahead of the $5.44 billion forecast. Revenue increased 6.8% year over year, supported by growth in employer services and human resources outsourcing. ADP Q4 Earnings Beat Estimates on Revenue Growth, Margin Gains
• Positive Sentiment: Management expects continued growth. ADP said revenue and earnings should continue rising in fiscal 2027, with client-funds income, productivity improvements and margin gains providing additional support. The company’s fiscal 2027 EPS guidance is $12.12 to $12.34. ADP Targets More Gains Ahead After Quarterly Growth
• Positive Sentiment: Analysts raised price targets. Guggenheim lifted its target to $300 and upgraded ADP to “buy,” while BMO Capital Markets raised its target to $305, the highest among the latest revisions. Citi, Morgan Stanley, Stifel and Wells Fargo also increased targets to $287, $286, $285 and $283, respectively. The revisions signal greater confidence in ADP’s earnings outlook following the results.
• Neutral Sentiment: Analyst ratings remain mixed. BMO maintained “market perform,” while Citi, Morgan Stanley, Stifel and Wells Fargo retained neutral, equal-weight or hold ratings. This suggests analysts see upside but believe much of the post-earnings improvement may already be reflected in the stock.
• Negative Sentiment: Valuation and market risks remain. ADP trades at roughly 24 times earnings after a substantial five-year advance, potentially limiting near-term upside. Broader market volatility, including pressure from higher oil prices, geopolitical tensions and interest-rate uncertainty, could also weigh on shares despite the company’s defensive business model. Automatic Data Processing Stock Looks Reasonable After Its 44% Five Year Run

About Automatic Data Processing

Automatic Data Processing, Inc (ADP) is a global provider of cloud-based human capital management (HCM) and payroll solutions. Founded in 1949 and headquartered in Roseland, New Jersey, ADP began as a payroll processing company and has evolved into a diversified provider of workforce management, HR, benefits administration, tax and compliance services, and analytics for employers of all sizes.

ADP’s product portfolio includes payroll processing and tax filing, time and attendance systems, benefits administration, talent management, and HR outsourcing.