ADP Reports Strong Start to Fiscal 2022 as Economic Conditions Recover; $202 FVE Maintained

Wide-moat ADP benefited from improved economic conditions during the first quarter of fiscal 2022, supporting strong demand for its payroll and human capital management solutions. We maintain our $202 fair value estimate. Group revenue increased 10% on the COVID-19-affected prior period, with a standout 15% revenue growth in the professional employer organization segment underpinned by a recovery in average worksite employees. Improved operating leverage driven by greater sales productivity and deferred internal hiring underpinned adjusted EPS growth of 17%.