Dayforce Earnings: Enterprise Momentum Continues as Firm Displaces Existing HCM Offerings

Narrow-moat Dayforce kicked off 2024 with a solid start, as top-line growth and profitability came in marginally ahead of our expectations because of strong customer acquisition, improving scale based operating leverage, and upside from interest income. Following the result, we have tweaked our near-term forecasts to align with updated guidance; however, this is immaterial to our valuation. Shares fell sharply after results, despite Dayforce marginally surpassing consensus earnings per share estimates. At a sizable discount of 34% relative to our unchanged $86 per share fair value estimate, Dayforce shares screen as attractive. We maintain our belief that the market is underestimating the firm’s unyielding growth in enterprise markets as it continues to chip away at market share from legacy incumbent human capital management providers.