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Paychex (PAYX) Q1 Earnings & Revenues Beat Estimates, Ups View

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Paychex, Inc.(PAYX - Free Report) reported better-than-expected first-quarter fiscal 2022 results.

Adjusted earnings of 89 cents per share beat the Zacks Consensus Estimate by 9.9% and increased 41.3% on a year-over-year basis. Total revenues of $1.08 billion beat the consensus mark by 3.9% and increased 16.2% year over year.

So far this year, shares of Paychex have gained 15.7% compared with 13.3% growth of the industry it belongs to and 17.1% rise of the Zacks S&P 500 composite.

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Revenues in Detail                  

Revenues from Management Solutions increased 17% year over year to $805.5 million. The segment benefited from growth in the company’s client base and increased penetration of its suite of solutions, especially HR outsourcing, and time and attendance.

Professional employer organization (“PEO”) and Insurance Solutions revenues were $262.9 million, up 14% from the year-ago quarter. The uptick was due to an increase in the number of worksite employees, impact of an increase in average wages per worksite employee, higher revenues on state unemployment insurance and rise in PEO health insurance revenues.

Interest on funds held for clients decreased 3% year over year to $14.5 million on lower average interest rates, partially offset by increase in average investment balances.

Operating Performance

Adjusted operating income increased 41% year over year to $442.9 million. Adjusted operating margin rose to 40.9% from 33.8% in the year-ago quarter.

Adjusted EBITDA of $498.6 million increased 36% year over year.

Paychex, Inc. Price, Consensus and EPS Surprise

Paychex, Inc. Price, Consensus and EPS Surprise

Paychex, Inc. price-consensus-eps-surprise-chart | Paychex, Inc. Quote

Balance Sheet & Cash Flow

Paychex exited first-quarter fiscal 2022 with cash and cash equivalents of $1.10 billion compared with $995.2 million at the end of the prior quarter. Long-term debt was $797.4 million compared with $797.3 million in the prior quarter.

Cash provided by operating activities was $385.6 million in the reported quarter. During the reported quarter, the company paid out $238.1 million in dividends.

Fiscal 2022 View

For fiscal 2022, total revenues are expected to register almost 8% growth compared with the prior expectation of 7%. Adjusted earnings per share are expected to register 12-14% growth compared with the prior expectation of 10-12%.

Management Solutions revenues are expected to grow nearly 8% compared with the prior expectation of 7%.

Adjusted operating margin is expected to be almost 38-39% compared with the prior expectation of 38%. Adjusted EBITDA margin is expected to be nearly 43% compared with the prior expectation of 42%.

Currently, Paychex carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Business Services Companies

Equifax’s (EFX - Free Report) second-quarter 2021 adjusted earnings of $1.98 per share beat the Zacks Consensus Estimate by 15.8% and increased on a year-over-year basis. Revenues of $1.23 billion outpaced the consensus estimate by 6.4% and rose 26% year over year on a reported basis and 23% on a local-currency basis.

Robert Half’s (RHI - Free Report) second-quarter 2021 earnings of $1.33 per share beat the consensus mark by 26.7% and surged more than 100% year over year. Revenues of $1.6 billion surpassed the consensus mark by 6.5% and increased 42.3% year over year on a reported basis and 40% on an adjusted basis.

ManpowerGroup’s (MAN - Free Report) second-quarter 2021 adjusted earnings of $2.02 per share beat the consensus mark by 68.2% and increased more than 100% year over year. Revenues of $5.28 billion beat the consensus mark by 2% and rallied 41% year over year on a reported basis and 31.3% on a constant-currency basis.