Automatic Data Processing (ADP) is expected to post a "modest" fiscal Q3 beat and potentially reiterate its fiscal 2025 outlook as the company expects slower growth in Q3 and a rebound in Q4, RBC Capital Markets said in a Wednesday note.

According to RBC, the company said "favorable timing influences" in Q2 drove revenue. The investment firm expects the absence of this one-off factor, coupled with a strong US dollar and lower short-term interest rates, to weigh on Q3 results.

Automatic Data Processing expects adjusted earnings per share growth and adjusted earnings before interest and taxes margin expansion to contract in Q3, reflecting an anticipated softer revenue in the quarter, RBC noted. On the other hand, RBC also flagged potential acceleration of revenue and modest foreign exchange tailwinds in Q4.

RBC analysts also said they do not expect tariff impacts to show up in the company's Q3 results, which are set to be released before the market opens on April 30.

RBC has a sector perform rating on Automatic Data Processing, with a price target of $315.

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