UPDATE 1-Wells Fargo starts ADP, Paychex with outperform

Sept 22 (Reuters) - Wells Fargo Securities initiated coverage of Automatic Data Processing (ADP.O) and Paychex Inc (PAYX.O) with "outperform" ratings, and said as the job market improves and the economy stabilizes, the payroll processing companies' shares should move higher.

"Assuming that job losses will begin to slow as we exit 2009, we believe that market share gains will facilitate some net gains in clients and payroll revenue as Paychex refines its sales effort and leverages the breadth of its product offering," the brokerage said.

Wells Fargo also resumed coverage of transaction processing companies Alliance Data Systems (ADS.N) and DealerTrack Holdings (TRAK.O) with "market perform" ratings, saying the current valuations are fairly supported.

For ADS, the brokerage said the company's focus on marketing and loyalty services should drive attractive earnings-per-share growth over the long term. (Reporting by Jennifer Robin Raj in Bangalore; Editing by Anne Pallivathuckal)