ADP Earnings: Strong New Business Demand Continues Amid Decelerating Employment Growth

We maintain our $240 fair value estimate for wide-moat ADP following a robust second-quarter result, which tracks our full-year top line and profitability expectations. While employment growth continues to moderate as we expected, ADP reported strong bookings momentum, pointing to a healthy demand environment and stabilizing hiring activity in the professional employer organization as recent sector-specific headwinds abate. Management maintained the firm’s full-year top-line growth outlook; however, narrowed margin guidance on the expectation of lower interest rates, dragging on float income and higher technology spending. Our unchanged forecasts are consistent with updated guidance, and we view ADP shares as fairly valued.