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Shares of Automatic Data Processing (NASDAQ:ADP) fell 7 percent year-to-date and slipped 6 percent Wednesday after the company reported strong second quarter earnings results but cut revenue and bookings guidance. Argus sees this recent weakness as a buying opportunity.
The bullish thesis of Argus on ADP is based on:
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- Consistent low double-digit EPS growth, driven by jobs growth and regulatory changes.
- Cloud-based Human Capital Management (HCM) services to customers.
- One of the strongest balance sheets in U.S. business.
- Raised payout for 42 consecutive years; Dividend currently yields about 2.2 percent.
That said, ADP slashed its full-year currency-neutral revenue growth to 6 percent from 7-9 percent and now expects zero growth in bookings, a far cry from the company’s target range of 8-10 percent.
The company blamed uncertainty surrounding government policies post-election that resulted clients delaying their spending.
“Recent uncertainty over the scope of government regulation changes has led to a sell-off in the shares. We see that as a buying opportunity,” analyst John Eade wrote in a note.
Despite expecting slower sales and margin growth in the second half of the year, Eade maintained his FY2017 EPS estimate of $3.66. The analyst also reaffirmed his preliminary FY2018 EPS estimate of $4.08.
“[W]e think ADP is in a good spot to help corporations navigate change, once the changes have been established,” Eade added.
Eade rates ADP shares Buy, with a price target of $118.
At last check, shares of ADP rose 1.83 percent to $96.99.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.