ADP (NASDAQ:ADP) shares are tanking in the morning session today after the human capital management (HCM) solutions provider delivered a mixed set of first-quarter numbers. Despite a 7.1% year-over-year growth, revenue of $4.5 billion lagged estimates by $10 million. EPS of $2.08, however, outpaced expectations by $0.06.
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The company is witnessing robust new bookings growth and client revenue retention. During the quarter, revenue in the Employer Services segment rose by 9%, with client funds interest revenue remaining elevated. Revenue in the PEO Services segment lagged with a modest 3% growth. While new business bookings in PEO Services remained robust, the segment witnessed margin compression due to adjustments in workers’ compensation reserve and increased selling expenses.
Looking ahead to Fiscal Year 2024, ADP expects revenue to grow in the range of 6% to 7% alongside adjusted EPS growth of between 10% and 12%. Adjusted EBIT margin for the year is anticipated to expand by between 60 to 80 basis points.
Is ADP a Good Investment?
Overall, the Street has a Hold consensus rating on ADP. The average ADP price target of $266.88 implies a 20% potential upside.
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