We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Three-Tier Business Strategy Aids ADP Amid Intense Competition
Read MoreHide Full Article
ADP (ADP - Free Report) stock has gained 10.8% in the year-to-date period, outperforming the industry and the Zacks S&P 500 composite’s 6.7% and 0.8% growth, respectively.
ADP reported impressive third-quarter fiscal 2025 results. ADP’s earnings per share of $3.06 beat the consensus estimate by 3.4% and increased 6.3% from the year-ago quarter. Total revenues of $5.6 billion surpassed the consensus estimate by 1.1% and grew 5.7% on a year-over-year basis.
How is ADP Faring?
As a human capital management technology (“HCM”) and service provider, ADP utilizes its three-tier business strategy to retain and expand its footprint. The company is committed to delivering a holistic suite of cloud-based HCM and HR outsourcing (“HRO”) solutions. It is expanding its international HCM and HRO businesses with established local, indigenous software solutions and cloud-based multi-country solutions.
ADP leverages its transformation initiative to accelerate DataCloud penetration and boost investment in inside sales, mid-market migrations and service alignment initiatives. The transformation initiative enables the company to innovate, enhance operations and expand margins.
ADP is an essential stock for dividend-seeking investors. In 2022, the company paid out $1.7 billion in dividends, which increased to $1.9 billion in 2023 and $2.2 billion in 2024. This strategy emphasizes the company’s commitment to returning value to shareholders and underscores its business confidence. As we anticipate steady income growth in the coming years, we also place an optimistic bet on ADP’s ability to pay out consistent dividends.
The company’s current ratio at the end of the third quarter of fiscal 2025 was 1.02, which is substantially lower than the industry average of 2.38. Despite falling behind the industry standard, ADP holds a current ratio greater than 1, indicating its ability to pay off short-term obligations effectively.
Image Source: Zacks Investment Research
Furthermore, ADP faces significant competition in each of its product lines. Both its Employer services and PEO services segments compete with other independent business outsourcing companies in most of their operating regions. The surge in competition and migration from the legacy business has posed a negative impact on ADP’s retention rate.
The problem has bled into its talent management. The outsourcing industry is labor-intensive and highly foreign talent-dependent. To navigate through this rising competition, ADP must seek to hire more individuals, leading to rising talent costs and lowering the industry’s growth.
Image: Bigstock
Three-Tier Business Strategy Aids ADP Amid Intense Competition
ADP (ADP - Free Report) stock has gained 10.8% in the year-to-date period, outperforming the industry and the Zacks S&P 500 composite’s 6.7% and 0.8% growth, respectively.
ADP reported impressive third-quarter fiscal 2025 results. ADP’s earnings per share of $3.06 beat the consensus estimate by 3.4% and increased 6.3% from the year-ago quarter. Total revenues of $5.6 billion surpassed the consensus estimate by 1.1% and grew 5.7% on a year-over-year basis.
How is ADP Faring?
As a human capital management technology (“HCM”) and service provider, ADP utilizes its three-tier business strategy to retain and expand its footprint. The company is committed to delivering a holistic suite of cloud-based HCM and HR outsourcing (“HRO”) solutions. It is expanding its international HCM and HRO businesses with established local, indigenous software solutions and cloud-based multi-country solutions.
ADP leverages its transformation initiative to accelerate DataCloud penetration and boost investment in inside sales, mid-market migrations and service alignment initiatives. The transformation initiative enables the company to innovate, enhance operations and expand margins.
ADP is an essential stock for dividend-seeking investors. In 2022, the company paid out $1.7 billion in dividends, which increased to $1.9 billion in 2023 and $2.2 billion in 2024. This strategy emphasizes the company’s commitment to returning value to shareholders and underscores its business confidence. As we anticipate steady income growth in the coming years, we also place an optimistic bet on ADP’s ability to pay out consistent dividends.
The company’s current ratio at the end of the third quarter of fiscal 2025 was 1.02, which is substantially lower than the industry average of 2.38. Despite falling behind the industry standard, ADP holds a current ratio greater than 1, indicating its ability to pay off short-term obligations effectively.
Furthermore, ADP faces significant competition in each of its product lines. Both its Employer services and PEO services segments compete with other independent business outsourcing companies in most of their operating regions. The surge in competition and migration from the legacy business has posed a negative impact on ADP’s retention rate.
The problem has bled into its talent management. The outsourcing industry is labor-intensive and highly foreign talent-dependent. To navigate through this rising competition, ADP must seek to hire more individuals, leading to rising talent costs and lowering the industry’s growth.
Zacks Rank & Stocks to Consider
ADP has a Zacks Rank #3 (Hold) at present.
Some better-ranked stocks in the broader Zacks Computer and Technology sector are Pitney Bowes (PBI - Free Report) and Teradata (TDC - Free Report) .
Pitney Bowes has a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PBI has a long-term earnings growth expectation of 15%. It delivered a trailing four-quarter earnings surprise of 82.4%, on average.
Teradata currently carries a Zacks Rank of 2.
TDC has a long-term earnings growth expectation of 2.4%. It delivered a trailing four-quarter earnings surprise of 24.6%, on average.