I'm Reiterating my Buy rating for Automatic Data Processing (NYSE: ADP), first recommended on May 8, 2009 at a price of $36.84. To be sure, at least short-term, headwinds will confront ADP, as monthly job gains are not likely to approximate levels experienced during the initial stage of previous U.S. economic recoveries.
Longer-term, the payroll out-sourcing market has ample room for market share gains and the mining of new client theatres, especially small/medium sized businesses. International business opportunities and a strong balance sheet further supports the Buy rating.
Technically, a triple bottom at/near $33 provides better-than-decent support. The First Call FY2009/FY2010 EPS estimates for ADP are $2.36 to $2.51.
Stock Analysis: Automatic Data Processing is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in ADP now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your ADP position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $22.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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