Analysts Are Updating Their Automatic Data Processing, Inc. (NASDAQ:ADP) Estimates After Its Third-Quarter Results

Investors in Automatic Data Processing, Inc. (NASDAQ:ADP) had a good week, as its shares rose 9.0% to close at US$214 following the release of its quarterly results. Automatic Data Processing reported US$5.9b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$3.38 beat expectations, being 2.3% higher than what the analysts expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

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Taking into account the latest results, the consensus forecast from Automatic Data Processing's 16 analysts is for revenues of US$23.1b in 2027. This reflects a reasonable 6.8% improvement in revenue compared to the last 12 months. Per-share earnings are expected to swell 12% to US$12.10. In the lead-up to this report, the analysts had been modelling revenues of US$23.0b and earnings per share (EPS) of US$11.96 in 2027. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

See our latest analysis for Automatic Data Processing

It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$246. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Automatic Data Processing at US$305 per share, while the most bearish prices it at US$190. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Automatic Data Processing's revenue growth will slow down substantially, with revenues to the end of 2027 expected to display 5.4% growth on an annualised basis. This is compared to a historical growth rate of 7.6% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 6.6% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Automatic Data Processing.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at US$246, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Automatic Data Processing going out to 2028, and you can see them free on our platform here.

You can also see whether Automatic Data Processing is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.