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Here's Why You Should Retain ADP Stock in Your Portfolio
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Automatic Data Processing, Inc. (ADP - Free Report) has had an impressive run over the past year, appreciating 13.7%.
The company has a long-term (three to five years) expected EPS growth rate of 9.9%. Its earnings are expected to increase 11.2% and 8.8% in fiscal 2024 and 2025, year over year, respectively.
ADP’s three-tier business strategy helps it maintain and grow its strong position as a human capital management (HCM) technology and services provider. The company is focused on delivering a complete suite of cloud-based HCM and HR Outsourcing solutions. It is expanding its international HCM and HRO businesses with established local, in-country software solutions and cloud-based multi-country solutions.
ADP has been able to accelerate DataCloud penetration and increase investments in inside sales, mid-market migrations and service alignment initiatives through its ongoing transformation initiatives. Through these initiatives, it continues to create, improve operations, expand margins and enhance innovation abilities. We expect the company’s revenues from the Employer Services segment to rise 7.7% year over year in fiscal 2024. PEO Services revenues are expected to grow 3.5%.
ADP has a consistent track record of dividend payments. In fiscal 2023, 2022, and 2021, the company paid $1.9 billion, $1.7 billion and $1.6 billion in dividends, respectively. Such moves indicate the company’s commitment to return value to shareholders and underline its confidence in business. We are expecting steady growth in income, which will translate to steady cash flow, enabling ADP to pay out stable dividends. Per our estimates, adjusted net income will grow 10.5% in fiscal 2024.
Some Risks
The outsourcing industry is labor-intensive and heavily dependent on foreign talent. Rising talent costs due to competition could curb the industry’s growth. ADP, being one of the companies in the industry, is likely to be affected.
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Here's Why You Should Retain ADP Stock in Your Portfolio
Automatic Data Processing, Inc. (ADP - Free Report) has had an impressive run over the past year, appreciating 13.7%.
The company has a long-term (three to five years) expected EPS growth rate of 9.9%. Its earnings are expected to increase 11.2% and 8.8% in fiscal 2024 and 2025, year over year, respectively.
Automatic Data Processing, Inc. Price
Automatic Data Processing, Inc. price | Automatic Data Processing, Inc. Quote
Factors That Bode Well
ADP’s three-tier business strategy helps it maintain and grow its strong position as a human capital management (HCM) technology and services provider. The company is focused on delivering a complete suite of cloud-based HCM and HR Outsourcing solutions. It is expanding its international HCM and HRO businesses with established local, in-country software solutions and cloud-based multi-country solutions.
ADP has been able to accelerate DataCloud penetration and increase investments in inside sales, mid-market migrations and service alignment initiatives through its ongoing transformation initiatives. Through these initiatives, it continues to create, improve operations, expand margins and enhance innovation abilities. We expect the company’s revenues from the Employer Services segment to rise 7.7% year over year in fiscal 2024. PEO Services revenues are expected to grow 3.5%.
ADP has a consistent track record of dividend payments. In fiscal 2023, 2022, and 2021, the company paid $1.9 billion, $1.7 billion and $1.6 billion in dividends, respectively. Such moves indicate the company’s commitment to return value to shareholders and underline its confidence in business. We are expecting steady growth in income, which will translate to steady cash flow, enabling ADP to pay out stable dividends. Per our estimates, adjusted net income will grow 10.5% in fiscal 2024.
Some Risks
The outsourcing industry is labor-intensive and heavily dependent on foreign talent. Rising talent costs due to competition could curb the industry’s growth. ADP, being one of the companies in the industry, is likely to be affected.
Zacks Rank & Stocks to Consider
ADP currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are SPX Technologies, Inc. (SPXC - Free Report) and Aptiv (APTV - Free Report) .
SPX Technologies flaunts a Zacks Rank of 1 (Strong Buy). It has a long-term earnings growth expectation of 18%. You can see the complete list of today’s Zacks #1 Rank stocks here.
SPXC delivered a trailing four-quarter earnings surprise of 13.9%, on average.
Aptiv currently has a Zacks Rank of 1. It has a long-term earnings growth expectation of 20.7%.
APTV delivered a trailing four-quarter earnings surprise of 12.2%, on average.