ADP Earnings Preview: Strong EPS Growth Expected

Automatic Data Processing is set to announce Q2 earnings, with expectations of EPS growth to $2.27, up 6.6% year-over-year. This positive outlook, along with consistent prior performance, could lead to upward pressure on stock prices.

Date: 08-01-2025

AI Rating: 7

Earnings Per Share (EPS): Analysts expect Automatic Data Processing (ADP) to report an earnings per share (EPS) of $2.27 for Q2, which is an increase of 6.6% compared to $2.13 in the same quarter last year. This growth signals strong business performance and could positively influence investor sentiment.

In the previous quarter (Q1), ADP reported an EPS of $2.33, exceeding consensus estimates by 5.9%. This strong performance indicates that the company is effectively managing its operations and reflecting strong demand for its services. For fiscal 2025, the anticipated EPS is $9.93, representing an 8.2% increase from $9.18 in fiscal 2024. This overall trend of increasing EPS is likely to be perceived positively by investors.

Revenue Growth: In Q1, ADP recorded revenue growth of 7% year-over-year, totaling $4.8 billion. The revenue increase reinforces the company's solid market position in the human capital management sector. Moreover, for fiscal 2025, ADP expects revenue growth to remain robust at between 6% and 7%, indicating a solid outlook for future performance.

Profit Margins: ADP's adjusted EBIT rose 13% year-over-year to $1.2 billion, with the adjusted EBIT margin expanding by 130 basis points to 25.5%. This margin expansion suggests improved operational efficiency, which can also lead to enhanced profitability moving forward.

Furthermore, ADP's share prices have increased by 22.1% over the past year, though it has underperformed compared to the S&P 500 Index. However, given the company's post-earnings stock gain of 1.7%, there may be a positive investor response to the upcoming earnings announcement.

Despite these positive signs, analysts maintain a cautious view, with a consensus holding rating and varying recommendations among the analyst community. The average price target of $296.25 implies a potential upside of 3.2%, suggesting investors may proceed with caution despite the underlying positive fundamentals.

Stocks: ADP