Guggenheim Initiates ADP as Buy, Says Fears around AI Are Premature

Automatic Data Processing, Inc. (NASDAQ:ADP) is included among the 15 Dividend Stocks to Buy for Steady Income.

On March 19, Guggenheim initiated coverage of Automatic Data Processing, Inc. (NASDAQ:ADP) with a Buy rating. The firm also set a $270 price target on the stock.  The analyst noted that ADP has lagged the S&P 500 so far this year. That has largely been tied to concerns that AI could replace workers and weigh on seat-based software vendors. Even so, the company has held up better than many of its peers. The firm acknowledged the risk, noting “it is far too early to significantly discount terminal values, especially for a diversified company like ADP.”

During its earnings call for Q4 2025, CFO Peter Hadley said the company has raised its fiscal 2026 consolidated revenue outlook and now expects growth of around 6%. He added that the forecast for adjusted EBIT margin expansion remains unchanged, with an expected increase of 50 to 70 basis points. He also said the company has increased its adjusted EPS growth outlook for fiscal 2026 to 9% to 10%, supported by continued share repurchases.

On segment performance, Hadley noted that the Employer Services revenue growth outlook has been lifted to about 6% for the full year. The PEO segment is still expected to grow between 5% and 7%, with revenue excluding zero-margin pass-throughs projected to increase between 3% and 5%. He added that the company continues to expect an effective tax rate of around 23% for the year. Guidance for new business bookings growth in fiscal 2026 remains in the range of 4% to 7%.

Automatic Data Processing, Inc. (NASDAQ:ADP) provides cloud-based human capital management solutions through its Employer Services and Professional Employer Organization segments.

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