Automatic Data Processing (ADP) Gains But Lags Market: What You Should Know

Automatic Data Processing (ADP) closed at $236.62 in the latest trading session, marking a +1.88% move from the prior day. The stock lagged the S&P 500's daily gain of 3.06%. Meanwhile, the Dow gained 2.8%, and the Nasdaq, a tech-heavy index, added 0.16%.

Prior to today's trading, shares of the payroll and human resources company had lost 2.61% over the past month. This has was narrower than the Business Services sector's loss of 8.85% and the S&P 500's loss of 6.15% in that time.

Investors will be hoping for strength from Automatic Data Processing as it approaches its next earnings release, which is expected to be October 26, 2022. On that day, Automatic Data Processing is projected to report earnings of $1.80 per share, which would represent year-over-year growth of 9.09%. Meanwhile, our latest consensus estimate is calling for revenue of $4.15 billion, up 8.34% from the prior-year quarter.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $8.05 per share and revenue of $17.88 billion. These totals would mark changes of +14.84% and +8.36%, respectively, from last year.

Investors should also note any recent changes to analyst estimates for Automatic Data Processing. Recent revisions tend to reflect the latest near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate remained stagnant. Automatic Data Processing is holding a Zacks Rank of #2 (Buy) right now.

Looking at its valuation, Automatic Data Processing is holding a Forward P/E ratio of 28.85. For comparison, its industry has an average Forward P/E of 12.67, which means Automatic Data Processing is trading at a premium to the group.

We can also see that ADP currently has a PEG ratio of 2.4. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. Outsourcing stocks are, on average, holding a PEG ratio of 1.35 based on yesterday's closing prices.

The Outsourcing industry is part of the Business Services sector. This industry currently has a Zacks Industry Rank of 58, which puts it in the top 24% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.

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