Paychex shares up 3% after beating Q1 estimates

Published on: 03 Oct, 2017

Paychex Inc. (NASDAQ: PAYX) reported its first quarter earnings for the 2018 fiscal year and beat earnings, but fell short of revenue, sending shares higher than 3 percent on Tuesday.

Paychex reported total revenue increased 4 percent year over year to $816.8 million, but falling short by $3.78 million of estimates. The company also reported an EPS increase of 11 percent year over year to $0.62 per share, beating estimates by $0.02.

Martin Mucci, President and Chief Executive Officer, said, “We posted solid growth across our major human capital management (“HCM”) product lines in the first quarter, in particular our comprehensive human resource (“HR”) outsourcing solutions and our cloud-based time and attendance products continue to perform well.”

Mucci said the the company continued to experience strong demand for its HR outsourcing solutions, along with the company’s recent acquisition of HR Outsourcing Inc. HR Outsourcing Inc. is a professional employer organization that serves small to medium size business. The two sectors of the company delivered strong growth and significantly helped revenue growth.

“We believe this acquisition affirms our strong presence in the PEO industry and demonstrates our continued commitment to providing our clients with industry-leading HR solutions.” said Mucci.

Paychex’s Human Resource Services (“HRS”) reported revenue of $345.3 million for the first quarter, a 7 percent increase year over year. The company says that HRS revenue growth was driven due to increase in client base across major HCM services.

Paychex 2018 fiscal year outlook remains the same, but has updated its second quarter outlook.

For the second quarter, Paychex is now expecting total revenue to increase approximately 6 percent, which 1 percent higher than the previous outlook. The new updated revenue outlook translate to $3.34 billion, and Zacks analysts’ consensus call for $3.31 billion.

The company also expects HRS revenue to increase in the range of 12 percent to 14 percent. Operating income as a percent of total revenue is expected to be in the range of 39 percent to 40 percent.

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