9. Automatic Data Processing, Inc. (NASDAQ:ADP)
Number of Hedge Fund Holders: 68
Dividend Yield as of May 21: 3.09%
Automatic Data Processing, Inc. (NASDAQ:ADP) is a comprehensive global provider of cloud-based human capital management (HCM) solutions that unite HR, payroll, talent, time, tax and benefits administration, and is a leader in business outsourcing services, analytics, and compliance expertise.
On May 18, Wells Fargo upgraded Automatic Data Processing, Inc. (NASDAQ:ADP) from ‘Underweight’ to ‘Equal Weight’, while assigning the stock a price target of $214.
Wells Fargo believes that ADP offers a better risk/reward profile at current levels, given the “modest improvement” in the company’s fundamentals and its year-to-date share price weakness. The analyst firm is of the view that while the recent concerns surrounding AI “are not completely unfounded, they are likely overdone”.
Automatic Data Processing, Inc. (NASDAQ:ADP) posted strong results for its Q3 2026 last month, exceeding estimates in both profits and revenue. The company delivered 7% revenue growth, 80 basis points of adjusted EBIT margin expansion, and 10% adjusted EPS growth compared to the year-ago period.
Moreover, ADP raised its guidance for FY 2026. The company now expects its adjusted EPS to rise by 10%-11%, compared to its prior outlook for a 9%-10% growth. Its consolidated revenue growth outlook also now stands at 6% to 7%, from around 6% previously. Additionally, the company now expects full-year EBIT margin expansion of 70-80 basis points, versus its prior range of 50-70 bps.
Matrix Asset Advisors, an asset management company, stated the following regarding Automatic Data Processing, Inc. (NASDAQ:ADP) in its Q1 2026 investor letter:
“During the quarter, we started new partial positions in Automatic Data Processing, Inc. (NASDAQ:ADP) and Procter & Gamble. Automatic Data Processing (ADP) is a leader in the business of administering payroll, group health insurance, business insurance, workers’ comp plans, retirement plans, and compliance for large and small businesses. These administrative functions are critical to a business’s operations, and the company has a very high client retention rate. The company’s stock price has declined approximately 30% over the past year on concerns that artificial intelligence will disrupt its business and a slowing labor market. ADP has a long history of increasing earnings and dividends. At our initial purchase price of about $215, the shares were trading at the lower end of their historic P/E multiple, 18x forward earnings, and at the higher end of their dividend yield at 3.2%. ADP has increased its dividend for over 50 consecutive years. We believe the share price will rebound strongly when the company demonstrates that the fears about AI’s disruption to its business are exaggerated.”
