ADP (ADP) Down 11.2% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Automatic Data Processing (ADP). Shares have lost about 11.2% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is ADP due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important catalysts.

ADP's Q2 Earnings Beat Estimates

Automatic Data Processing has reported impressive second-quarter fiscal 2026 results, wherein earnings and revenues outpaced the Zacks Consensus Estimate.

ADP’s earnings per share of $2.62 beat the consensus estimate by 1.6% and increased 11.5% from the year-ago quarter. Total revenues of $5.4 billion missed the consensus estimate by a slight margin but grew 6.2% on a year-over-year basis.

ADP’s Segmental Results

Employer Services’ revenues of $3.6 billion increased 6% on a reported basis and 5% on an organic constant-currency basis, surpassing the Zacks Consensus estimate of $3.3 billion. Pays per control increased 1% with the year-ago quarter.

PEO Services’ revenues gained 6% from the year-ago quarter to $1.8 billion and beat the consensus mark of $1.7 billion. Average worksite employees paid by PEO Services were 758,000, rising 2% from the year-ago quarter.

Interest on funds held for clients grew 13% from the year-ago quarter to $309 million and missed the consensus estimate of $310.2 million. ADP’s average client funds balance rose 6% to $37.6 billion. The average interest yield on client funds expanded 20 basis points (bps) to 3.3%.

Automatic Data Processing’s Margins

Adjusted EBIT increased 10% on a year-over-year basis to $1.4 billion. The adjusted EBIT margin gained 80 bps to 26%. The margin of Employer Services decreased 50 bps, while PEO Services dipped 70 bps from the year-ago quarter.

Balance Sheet & Cash Flow of ADP

Automatic Data Processing exited second-quarter fiscal 2026 with cash and cash equivalents of $2.4 billion compared with $2.5 billion at the end of the preceding quarter. The long-term debt of $4 billion remained flat with the preceding quarter. The company generated $1.1 billion in cash from operating activities in the quarter.

Automatic Data Processing’s FY26 Outlook

For fiscal 2026, ADP expects year-over-year revenue growth of 6% compared with the preceding quarter’s projection of 5-6%. The adjusted EPS growth guidance is kept at 9-10% compared with the 8-10% provided in the first quarter of fiscal 2026. The adjusted effective tax rate is estimated to be 23%. The guidance for the adjusted EBIT margin is 50-70 bps. Automatic Data Processing’s Employer Services’ revenue growth expectations are at 6% compared with the 5-6% provided in the preceding quarter. For PEO Services, revenue growth is kept at 5-7%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, ADP has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a score of C on the value side, putting it in the middle 20% for value investors.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

ADP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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Automatic Data Processing, Inc. (ADP): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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