ADP Raises FY2026 Guidance After Q2 Earnings Beat Estimates
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1d ago
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Source: seekingalpha
- Earnings Beat: ADP reported a fiscal Q2 adjusted EPS of $2.62, surpassing the analyst estimate of $2.57, and increasing from $2.49 in Q1 and $2.35 in the same quarter last year, indicating sustained profitability improvements.
- Revenue Growth Outlook: The company raised its FY2026 revenue growth guidance to exceed 6%, up from the previous 5%-6% range, implying revenues of over $21.8 billion, reflecting strong confidence in future performance and robust market demand.
- Margin Expansion: ADP expects adjusted EBIT margin expansion of 50-70 basis points, with a reported margin of 26.0% in Q2, up from 25.5% in the prior quarter and 25.2% a year ago, demonstrating improved operational efficiency.
- Ongoing Strategic Investments: The CFO emphasized that a continued focus on execution and new business growth has enabled strong revenue and earnings growth, while the updated guidance showcases the company's commitment to strategic investments for sustainable long-term growth.
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Analyst Views on ADP
Wall Street analysts forecast ADP stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for ADP is 290.27 USD with a low forecast of 230.00 USD and a high forecast of 332.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
11 Analyst Rating
1 Buy
7 Hold
3 Sell
Hold
Current: 250.690
Low
230.00
Averages
290.27
High
332.00
Current: 250.690
Low
230.00
Averages
290.27
High
332.00
About ADP
Automatic Data Processing, Inc. is a provider of cloud-based human capital management (HCM) solutions. Its segments include Employer Services and Professional Employer Organization (PEO). Its Employer Services segment serves clients ranging from single-employee small businesses to large enterprises with tens of thousands of employees around the world, offering a range of technology-based HCM solutions, including its cloud-based platforms, and human resource outsourcing (HRO) (other than PEO) solutions. Its offerings include Payroll Services, Benefits Administration, Talent Management, HR Management, Workforce Management, Compliance Services, Insurance Services and Retirement Services. Its PEO business, called ADP TotalSource, provides clients with guidance, technology, comprehensive employee benefits, risk management, safety, and workers’ compensation program. Its compensation management software supports the compensation planning needs.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
ADP Set to Announce Q2 Earnings on January 28
- Earnings Announcement Date: Automatic Data Processing (ADP) is set to release its Q2 earnings on January 28 before market open, with consensus EPS estimate at $2.57, reflecting a 9.4% year-over-year growth, indicating sustained profitability.
- Revenue Expectations: The revenue estimate stands at $5.34 billion, representing a 6.8% year-over-year increase, showcasing the company's robust performance and ongoing customer demand in the market.
- Historical Performance: Over the past two years, ADP has consistently beaten both EPS and revenue estimates 100% of the time, highlighting the company's reliability and consistency in financial performance, which boosts investor confidence.
- Estimate Revisions: In the last three months, EPS estimates have seen three upward revisions and eight downward adjustments, while revenue estimates experienced four upward revisions and seven downward changes, indicating market uncertainty and differing opinions on ADP's future performance.
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ADP Reports Strong Q2 Results Exceeding Expectations
- Revenue Growth: ADP's Q2 revenue reached $5.36 billion, surpassing analyst expectations of $5.34 billion with a year-over-year increase of 6%, indicating strong market performance and sustained client demand.
- Profitability Improvement: Adjusted EBIT rose 10% to $1.4 billion, with EBIT margin increasing by 80 basis points to 26.0%, reflecting the company's success in cost control and service efficiency.
- Segment Performance: Revenues from Employer Services and PEO Services both grew by 6%, reaching $3.61 billion and $1.76 billion respectively, demonstrating ADP's stable growth and competitive position in its core business areas.
- Outlook Adjustment: ADP raised its FY26 revenue growth outlook to 6%, expecting to reach $21.8 billion, with adjusted EPS growth projected at 9%-10%, showcasing the company's confidence in future performance and proactive market strategies.
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