ADP Stock Forecast & Price Target

Automatic Data Processing is positioned to outperform its peers due to its strong balance sheet credibility and brand permanence, allowing it to maintain its win rate amid a flight to safety for customers in the unpredictable macro environment. Additionally, ADP has a stable employment backdrop and is well-positioned to capitalize on any acceleration in growth, with financial metrics that align with other software companies and HCM vendors. Overall, ADP offers strong fundamentals with a fair valuation, making it a strong choice for stable compound growth in most economic environments.

Automatic Data Processing is likely to achieve consensus estimates of $15.62B, a 5.6% growth y/y with about 10% growth in New ARR. CFO Peter Hadley expects continued focus on accelerating margin expansion through AI-driven productivity benefits, continued client funds portfolio tailwinds, and elevated share repurchase activity. Assuming current reinvestment rates and balance growth remain stable, we estimate FY27 Client Float income of ~$1,500mn, ~$90mn above consensus, representing a ~30bpincremental tailwind to margins. While AI adoption remains early, 4% of respondents reported AI embedded in core HR/payroll processes today. PEO growth has been relatively stable, though we model modest growth deceleration in FY27, with a potential slowdown in hiring and retention due to healthcare inflation and softening in PEO same-store hiring.