Dayforce Earnings: Enterprise Sales Continue to Drive Top-Line Growth

Narrow-moat Dayforce reported robust second-quarter earnings with top-line growth tracking our full-year expectations, but profitability falling short of our above-consensus forecasts. However, while Dayforce continues to clock impressive momentum in the enterprise and global markets, we have tempered our long-term growth expectations and reduced our fair value estimate to $70 per share from $86 while maintaining our High Morningstar Uncertainty Rating. On reassessment of the competitive landscape, we now expect pressures from incumbent providers like wide-moat ADP, which is enjoying record customer satisfaction and resilient retention, to curb Dayforce’s expansion relative to our prior estimates. Nevertheless, Dayforce has a long runway for growth, and despite shares rallying 10% in intraday trading, Dayforce continues to trade at an attractive 15% discount to our updated valuation.