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Paylocity (PCTY) to Report Q3 Earnings: What's in the Cards?

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Paylocity Holding Corporation (PCTY - Free Report) is slated to release third-quarter fiscal 2018 results on May 3. Notably, Paylocity has a solid earnings surprise history. The stock surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average positive surprise of 235.9%.

Let’s take a look at how things are shaping up prior to this announcement.

Factors to Consider

Paylocity’s regular investments in SaaS technology is a huge tailwind, given its clients’ shift from traditional payroll service providers to the company’s SaaS-based services, which have been significantly contributing to the top line.

Accelerated adoption of Paylocity’s Affordable Care Act (ACA) dashboard application, specializing in tracking employee count, employee status and health care plan affordability is also a positive.

Notably, the company has also been improving its product suite by adding products and via inorganic additions. The company announced the acquisition of BeneFLEX HR Resources – a privately held employee benefit agency in March 2018.

Per Paylocity’s CEO, Steve Beauchamp, this inorganic addition has enriched the company’s product suite with a host of benefit administration related solutions. Apart from this, the acquisition brings in BeneFLEX’s 36 trained employees along with a number of “clients and referring brokers” to Paylocity.

On the second quarter conference call, the company stated that though its R&D expenditure has increased, it positively impacted the adoption and usage rate of its platform. We believe the investments will continue to yield positive results for the company in the soon-to-be reported quarter as well.

What the Zacks Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

Paylocity has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for the fourth quarter is pegged at 47 cents per share, indicating 17.5% increase on a year-over-year basis. Revenues are estimated to be around $110.6 million, indicating 22.6% increase from the year-ago quarter.

Stocks to Consider

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Arrow Electronics, Inc. (ARW - Free Report) has an Earnings ESP of +0.66% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fortinet, Inc. (FTNT - Free Report) has an Earnings ESP of +2.70% and a Zacks Rank #3.

CyberArk Software Ltd. (CYBR - Free Report) has an Earnings ESP of +3.53% and a Zacks Rank #3.

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