TD Cowen Reviews ADP as Segment Performance Diverges

Automatic Data Processing, Inc. (NASDAQ:ADP) is included among the Dividend Growth Stocks: 25 Aristocrats.

TD Cowen trimmed its price objective on Automatic Data Processing, Inc. (NASDAQ:ADP) on January 29 to $255 from $263. The firm also kept a Hold rating on the stock, noting ADP continues to perform well in its Employer Services business, but softer results in the PEO segment are raising some caution. TD Cowen added that broader pressures across the sector are still weighing on the outlook.

That cautious stance comes even after a better-than-expected quarter. A day earlier, on January 28, ADP raised its full-year revenue forecast and beat profit estimates, supported by steady demand for payroll and HR services. Second-quarter revenue came in at $5.36 billion, slightly ahead of the $5.34 billion analysts were expecting, based on data from LSEG. Adjusted earnings were $2.62 per share, topping the consensus estimate of $2.57.

Following the results, ADP said it now expects revenue to grow about 6% for the year, which sits at the upper end of its previous guidance range. The company’s U.S. pay-per-control metric, which reflects how many employees are on client payrolls, rose 1% from a year ago, in line with trends seen over the past few quarters.

The labor market backdrop remains mixed. Layoffs are still relatively limited, but hiring has slowed noticeably, which could temper growth going forward.

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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