Stifel has trimmed its target price for Automatic Data Processing (NASDAQ: ADP) to $280 from $290 while retaining a Hold recommendation on the payroll and human capital management provider.
The move follows ADP's fiscal second-quarter 2026 results, which showed 5% organic constant currency revenue growth - in line with expectations - and earnings per share growth of 11%, which Stifel characterizes as a modest beat. ADP posted EPS of $2.62 for the quarter versus a consensus forecast of $2.57, and revenue of $5.4 billion compared with an expected $5.34 billion.
Management slightly raised fiscal 2026 guidance, now looking for 6% constant currency revenue growth and 9-10% EPS growth. Stifel notes that the incremental guidance strength largely reflects higher float and interest income balances. Those income drivers, together with operating leverage, underpin the company's outlook for margin expansion of 50-70 basis points year-over-year. The firm also expects share repurchases to contribute to EPS growth that outpaces revenue growth.
On sales momentum, ADP left its bookings guidance unchanged in a 4-7% growth band. However, the company trimmed its expectation for Professional Employer Organization (PEO) worksite employee growth to the lower end of its 2-3% range. Management attributes that downward revision to a combination of softer bookings, lower PEO growth and an expectation of higher bankruptcies in the second half of fiscal 2026.
After the results and guidance update, ADP's stock closed roughly flat. Stifel highlights the stock's valuation dynamics, noting that ADP trades at about a 26% premium to the equal-weight S&P 500 on an earnings basis. The firm points out that this premium is a meaningful discount to ADP's historical trend-line range of 50-60%.
In parallel with Stifel's action, BMO Capital also adjusted its view of ADP. BMO lowered its price target to $281 from $288 and maintained a Market Perform rating. The bank described the company's results as presenting "mixed signals" that could support different interpretations in the market.
Taken together, the reports reflect a measured market reception: the quarter delivered a modest beat on both revenue and EPS, but forward metrics tied to bookings, PEO employment and anticipated bankruptcy trends have prompted caution among some analysts despite marginally stronger guidance and margin drivers tied to float and interest income.
Summary
ADP beat near-term earnings and revenue forecasts for fiscal Q2 2026, nudged up full-year guidance, and signaled modest margin improvement driven by higher float and interest income plus operating leverage. Stifel trimmed its price target to $280 while keeping a Hold, and BMO reduced its target to $281 with a Market Perform rating. Softness in PEO worksite employee growth and bookings, along with expectations of higher bankruptcies in H2, weighed on investor sentiment.