ADP Earnings: Resilient Retention and Healthy Demand Round Out Solid Fiscal 2024 Result

Wide-moat ADP reported robust fourth-quarter and full-year fiscal 2024 results that came in line with our top-line expectations but fell short of our above-consensus profitability assumptions. Nevertheless, we are encouraged by the firm’s resilient revenue retention, which is illustrative of the high customer switching costs underpinning ADP’s economic moat. Following the result and updated fiscal 2025 guidance, we raise our fair value estimate to $280 per share, from $240. Our upgraded valuation stems from improved profitability expectations as ADP reaps the benefits of better customer satisfaction, a strengthening product offering and lower customer attrition. At current prices, ADP shares screen as fairly valued on a risk-adjusted basis.