ADP Continues to Reap Benefits From Improving Labor Markets in Q2 2022, FVE Up 3% to $222

We raise our fair value estimate for ADP 3% to $222 following strong fiscal 2022 second-quarter results. Management lifted its full-year earnings guidance, reflecting an improved outlook for revenue retention and interest on client funds, and a continued recovery in labor markets aided by greater labor force participation. Despite ongoing disruptions to economic activity due to COVID-19 outbreaks, we are marginally more optimistic and expect fiscal 2022 earnings per share to increase 15% to $6.91, which is above the 12% to 14% guidance range. ADP now screens as undervalued, trading at approximately a 12% discount to our updated valuation.