ADP Downgraded to Underperform as Jefferies Flags Structural Headwinds

Core Viewpoint - Automatic Data Processing, Inc. (ADP) faces challenges that may hinder its growth, leading to a downgrade by Jefferies from Hold to Underperform, with a reduced price target of $230 from $245 [2] Financial Performance - In fiscal Q1 2026, ADP reported a revenue increase of 7% and adjusted EPS growth of 7% [2] - The quarter included record sales volume, with healthy growth in the small business portfolio and a resurgence in Employer Services HR Outsourcing [2] Strategic Initiatives - ADP announced the acquisition of Pequity, a compensation management software provider, enhancing its capabilities in complex compensation planning [3] - Management emphasized progress on key strategic priorities, indicating stability in HCM demand and specific strength in ADP Lyric HCM [2][3] Market Position and Challenges - Jefferies highlighted market saturation, competition from larger firms, and falling interest rates as significant headwinds for ADP's growth in 2025 [2] - The analyst expressed concerns that ADP's medium-term targets may be difficult to achieve due to these challenges [2]