(Reuters) - Payroll processors Automatic Data Processing Inc
Both companies could see only moderate core payroll revenue growth given the weak jobs growth, while persistently low interest rates will hurt their float income -- interest earned on funds held for clients, BARCLAYS (BARC.LO)said.
Barclays, which is less optimistic on PAYCHEX (PAYX.NQ) cut its rating on the stock to "underweight" from "equal weight." It downgraded ADP to "equal weight" from "overweight."
Earnings growth at ADP is unlikely to return to consistent double digit levels until the economy grows more rapidly and interest rates rise, the brokerage said.
U.S. job growth braked sharply for a third straight month in May, and the unemployment rate climbed for the first time in nearly a year, raising chances of further monetary stimulus from the Federal Reserve to support the sputtering recovery.
Barclays prefers ADP over Paychex, as it expects ADP's more diversified offerings and aggressive product development investments to yield faster growth.
The brokerage, however, upgraded Iron Mountain
Shares of ADP closed at $54.70 on Friday on the Nasdaq, while those of Iron Mountain closed at $32.78 on the New York Stock Exchange.
Paychex shares edged down about 1 percent in premarket trade on Monday. They closed at $32.26 on Friday on the Nasdaq.
(Reporting by Sagarika Jaisinghani in Bangalore; Editing by Tenzin Pema)