Outsourcing industry growth spurs interest in key stocks
CHICAGO, UNITED STATES — The outsourcing industry is poised for significant growth, with investors eyeing stocks within Paychex, Broadridge Financial Solutions, and Automatic Data Processing (ADP) for their bright near-term prospects.
Zacks Investment Research cited a ReportLinker report projecting that the outsourcing industry’s revenue could surge over $75 trillion through 2027 as compound annual growth hits 6.5%. Businesses are also expected to continue turning to outsourcing to tap skilled talent and technology while focusing internally.
Paychex, a top provider of human capital management (HCM) solutions to small and medium businesses, shows strength amid upbeat conditions. Its 2024 fiscal outlook anticipates an adjusted earnings per share growth of 10-11%, with total revenues expected to grow by 6-7%.
Steady expansion into professional employer organizations, plus consistent dividends and buybacks, enhances its investment case. The company’s interest in funds held for clients is anticipated to be in the range of $140-$150 million.
At the same time, the Zacks Consensus Estimate for Paychex for fiscal 2024 revenues is pegged at $5.33 billion, up by 6.5% from last year. The consensus mark for earnings is also at $4.72, indicating growth of 10.5% from the year-ago reported figure.
Likewise, Broadridge Financial’s acquisition-driven recurring revenue model has driven impressive top-line increases. Its business model, characterized by recurring fee revenues and strategic acquisitions, supports revenue growth across a diverse product portfolio.
Its diverse portfolio across governance, capital markets, and wealth management positions, as well as the demand for tech-enabled services, are climbing. Its new trading solution, launched last year, also helped clients achieve better trading decisions and client insights.
For fiscal 2024, Broadridge projects recurring revenue growth of 6-9% and adjusted earnings per share growth of 8-12%. The Zacks Consensus Estimate for the firm for FY24 revenues is pegged at $6.54 billion, suggesting an annual increase of 7.9%. The consensus mark for earnings is also at $7.72, indicating growth of 10.1% from the year-ago figure.
Finally, ADP maintains its human capital management dominance via cloud platforms, strategic deals, significant recurring revenue, and limited capital needs. Its projected 2024 revenue and adjusted earnings per share (EPS) growth of 6-7% and 10-12% highlight resilience.
The Zacks Consensus Estimate for ADP for fiscal 2024 revenues is pegged at $19.15 billion, calling for a 6.3% rise from last year. The consensus mark for earnings per share is pegged at $9.14, up 11.1% from the year-ago reported figure.
As the outsourcing industry’s growth accelerates, Paychex, Broadridge Financial, and ADP offer investors the opportunity to engage with a sector increasingly dependent on efficient, technology-driven human resources solutions.
Zacks stated that the three firms’ established market presence and financial strength are expected to help them seize emerging opportunities in this dynamic field.
