Automatic Data Processing: F4Q Review: Executing Well With Nice Momentum and FY27 Looking Largely Consistent With FY26

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Automatic Data Processing: F4Q Review: Executing Well With Nice Momentum and FY27 Looking Largely Consistent With FY26

ons, and we establish a $280 Dec 2027 price target

(vs. prior $275 Dec 2026 PT). Quarterly Forecasts (FYE Jun)

Adj. EPS ($)

• Outlook Summary. FY27 revenue and profit targets generally bracketed prior 2026A 2027E 2028E

estimates, though were a touch below Street at the midpoint. Specifically, Q1 2.49 2.92 3.14

FY27 guidance calls for 5%-6% revenue growth (JPM/Street 5.4%/5.9%), 70- Q2 2.62 2.98 3.23

Q3 3.38 3.73 4.04

90bps of adj. EBIT margin expansion (JPMe/Street at ~60bps), and EPS Q4 2.64 2.48 2.85

growth guidance of 9%-11% (JPMe/Street at 11%/10.5%). Management sees FY 10.91 12.11 13.25

4%-7% ES bookings growth (JPMe 6.3%), a similar range to FY26, and 2%

Style Exposure PEO WSE growth, a touch below JPMe (2.3%). Compared to initial FY26

guidance last year, most metrics were the same on slightly lower employment

growth, while EPS was 1ppt faster on both ends. We note FY27 revenue growth

is towards the low end of the company’s medium-term outlook provided in

June 2025 (6%-7%), though ahead on EBIT margin expansion (50-75bps),

supporting in-line Adj. EPS growth (9%-11%).

• Other Considerations Looking Ahead. Similar to commentary from banks

and payment providers that have reported C2Q results, ADP continues to see

macro-stability across its SMB, enterprise and international customer base.

That said, FY27 guidance bakes in what we view as prudent normalization in

the macro backdrop, which could prove conservative. Specifically, guidance

assumes 1) a modest deterioration in employee retention from record levels

today (Mgmt is not seeing evidence of incremental pressure), 2) some

normalization in wage inflation, manifesting in lower customer balance and