CFRA, an independent research provider, has provided MT Newswires with the following research alert. Analysts at CFRA have summarized their opinion as follows:
We cut our 12-month target price by $29 to $236 on a 26x multiple applied to our updated FY 2024 (Jun.) EPS estimate, slightly below ADP’s five-year historical forward average. We think a reduced multiple is reasonable in light of Q2 guidance for modest margin compression. We cut our FY 2024 EPS estimate by $0.05 to $9.09 but raise FY 2025’s by $0.13 to $10.06. ADP reported FQ1 (Jun.) EPS of $2.08 vs. $1.86, beating the consensus view by $0.06. Q1 revenues of $4.5 billion (+7% Y/Y) were essentially in line with consensus. ADP noted that its Professional Employer Organization (PEO) business saw margins narrow by 90 bps in Q1 (year-over-year). With higher selling expenses looming, as well as a deceleration in pays per control, management sees margins narrowing 50 bps-100 bps in FY 2024. To be fair, ADP also sees its Employer Services (ES) segment generating wider margins in FY 2024, with most of the heavy lifting coming in the second half of the fiscal year.