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Payroll and human resource solutions provider, Paychex Inc. (PAYX - Snapshot Report) is set to report fourth-quarter fiscal 2014 results on Jul 1. Last quarter, the company posted a positive earnings surprise of 4.8%. It is also worth noting that Paychex has outperformed the Zacks Consensus Estimate in all the four preceding quarters with a positive earnings surprise average of 3.0%.

Let us see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Paychex reported better-than-expected third-quarter results primarily boosted by modest revenue growth and margin expansion. Paychex reported better-than-expected third-quarter results, primarily boosted by modest revenue growth and margin expansion. Moreover, increases in checks per payroll and revenue per check positively impacted Payroll’s service revenues. Human Resource Services revenues were driven by client growth and price increases.

We remain encouraged by the company’s investments in product development and focus on building its sales force to support revenue growth. We also believe that the company’s expansionary initiatives such as joint ventures and acquisitions support its long-term growth strategy.

Product launches are also expected to provide additional support. Moreover, Paychex’s focus on small and mid-sized businesses looking for HR solutions could provide the company with additional opportunities.

However, unfavorable interest rates and competition from Automatic Data Processing (ADP - Analyst Report) and Insperity remain the possible headwinds for the company.

Earnings Whispers?

Our proven model does not conclusively show that salesforce will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stands at 40 cents. Hence, the difference is 0.00%.

Zacks Rank: Paychex’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies, which you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

CHC Group Ltd. (HELI - Snapshot Report) Earnings ESP of +3.33% and a Zacks Rank #2 (Buy)

Progressive Corp. (PGR - Analyst Report) has an Earnings ESP of +2.13% and holds a Zacks Rank #3


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