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Paychex (PAYX) Q2 Earnings Beat Estimates, Revenues Miss
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Paychex, Inc. (PAYX - Free Report) reported mixed second-quarter fiscal 2024 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same.
Adjusted earnings of $1.08 per share beat the Zacks Consensus Estimate and increased 9.1% on a year-over-year basis. Total revenues of $1.26 billion missed the consensus estimate but increased 5.7% year over year.
Service revenues of $1.2 billion were up 5% year over year but missed our estimate of $1.23 billion.
Revenues from the Management Solutions segment increased 4% year over year to $930.7 million but missed our estimate by a slight margin. The growth can be attributed to an increase in the clientele utilizing the company’s range of human capital management solutions, augmented revenue per client through enhanced price realization and greater product penetration, including HR Solutions and retirement offerings, as well as an expansion in ancillary services.
Professional employer organization (“PEO”) and Insurance Solutions’ revenues totaled $295.7 million, up 8% from the year-ago quarter’s level. The figure also beat our estimate by 1.8%. The expansion in the average number of employees at PEO worksites, the rise in PEO insurance revenues and the increased income generated from ancillary services serve as driving factors for the growth.
Interest on funds held for clients increased 44% year over year to $31.5 million, lower than our estimate of $32.8 million.
EBITDA of $551 million increased 6% year over year but lagged our estimate of $554.4 million. Operating income increased 7% year over year to $506.2 million but lagged our estimate by 1%. Operating margin was 40.2%, up 50 basis points from the year-ago reported figure.
Paychex exited the quarter with cash and cash equivalents of $1.36 billion compared with $1.65 billion reported at the end of the prior quarter. Long-term debt totaled $798.4 million compared with $798.3 million in the prior quarter.
Cash generated from operating activities amounted to $348.5 million while capital expenditures totaled $40.7 million.
Updated Fiscal 2024 Outlook
Paychex provided its fiscal 2024 outlook, wherein adjusted EPS is expected to register 10-11% growth from the previously estimated 9-11%. PAYX reaffirmed its projection of total revenues to register 6-7% growth.
Management Solutions’ revenues are expected to grow around 5-6%. PEO and Insurance Solutions’ revenues are anticipated to grow 7-9%, up from the previously guided 6-9%. Interest on funds held for clients is anticipated to be in the range of $140-$150 million. The company expects operating margin in the range of 41-42%.
Currently, Paychex carries a Zacks Rank #4 (Sell).
Here are a few other stocks from the broader Business Services sector that have performed well in their recent earnings release.
ABM Industries Inc. (ABM - Free Report) reported impressive fourth-quarter fiscal 2023 results, wherein both earnings and revenues beat their respective Zacks Consensus Estimate.
Adjusted earnings (considering 5 cents from non-recurring items) were $1.01 per share, which beat the consensus estimate by 8.6% and increased 13.5% from the previous year's quarterly figure.
Total revenues of $2.09 billion beat the consensus mark by 2.8% and improved 4.1% from the previous year’s reported actual. The upside was backed by solid segmental performance, strength from new accounts that came online late last year and the acquisition of RavenVolt. Quarterly revenue growth included 3.8% organic growth and a 0.3% upside from acquisitions.
S&P Global Inc. (SPGI - Free Report) reported impressive third-quarter results, wherein both earnings and revenues beat their respective Zacks Consensus Estimate.
SPGI’s adjusted earnings per share (excluding 88 cents from non-recurring items) of $3.21 rose 9.6% year over year and beat the consensus estimate by 5.3%. Revenues of $3.08 billion surpassed the consensus mark by 2% and improved 8% year over year, backed by strong performance in each of its divisions.
Verisk Analytics Inc.(VRSK - Free Report) reported impressive third-quarter 2023 results, wherein both earnings and revenues beat their respective Zacks Consensus Estimate.
VRSK’s adjusted earnings (excluding 23 cents from non-recurring items) were $1.52 per share, which beat the consensus estimate and increased 4.1% from the year-ago reported figure. This outperformance was due to strong growth in Underwriting Data Solutions, Life Insurance and Extreme Event Solutions.
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Paychex (PAYX) Q2 Earnings Beat Estimates, Revenues Miss
Paychex, Inc. (PAYX - Free Report) reported mixed second-quarter fiscal 2024 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same.
Adjusted earnings of $1.08 per share beat the Zacks Consensus Estimate and increased 9.1% on a year-over-year basis. Total revenues of $1.26 billion missed the consensus estimate but increased 5.7% year over year.
Service revenues of $1.2 billion were up 5% year over year but missed our estimate of $1.23 billion.
Paychex, Inc. Price, Consensus and EPS Surprise
Paychex, Inc. price-consensus-eps-surprise-chart | Paychex, Inc. Quote
Quarter Details
Revenues from the Management Solutions segment increased 4% year over year to $930.7 million but missed our estimate by a slight margin. The growth can be attributed to an increase in the clientele utilizing the company’s range of human capital management solutions, augmented revenue per client through enhanced price realization and greater product penetration, including HR Solutions and retirement offerings, as well as an expansion in ancillary services.
Professional employer organization (“PEO”) and Insurance Solutions’ revenues totaled $295.7 million, up 8% from the year-ago quarter’s level. The figure also beat our estimate by 1.8%. The expansion in the average number of employees at PEO worksites, the rise in PEO insurance revenues and the increased income generated from ancillary services serve as driving factors for the growth.
Interest on funds held for clients increased 44% year over year to $31.5 million, lower than our estimate of $32.8 million.
EBITDA of $551 million increased 6% year over year but lagged our estimate of $554.4 million. Operating income increased 7% year over year to $506.2 million but lagged our estimate by 1%. Operating margin was 40.2%, up 50 basis points from the year-ago reported figure.
Paychex exited the quarter with cash and cash equivalents of $1.36 billion compared with $1.65 billion reported at the end of the prior quarter. Long-term debt totaled $798.4 million compared with $798.3 million in the prior quarter.
Cash generated from operating activities amounted to $348.5 million while capital expenditures totaled $40.7 million.
Updated Fiscal 2024 Outlook
Paychex provided its fiscal 2024 outlook, wherein adjusted EPS is expected to register 10-11% growth from the previously estimated 9-11%. PAYX reaffirmed its projection of total revenues to register 6-7% growth.
Management Solutions’ revenues are expected to grow around 5-6%. PEO and Insurance Solutions’ revenues are anticipated to grow 7-9%, up from the previously guided 6-9%. Interest on funds held for clients is anticipated to be in the range of $140-$150 million. The company expects operating margin in the range of 41-42%.
Currently, Paychex carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks to Consider
Here are a few other stocks from the broader Business Services sector that have performed well in their recent earnings release.
ABM Industries Inc. (ABM - Free Report) reported impressive fourth-quarter fiscal 2023 results, wherein both earnings and revenues beat their respective Zacks Consensus Estimate.
Adjusted earnings (considering 5 cents from non-recurring items) were $1.01 per share, which beat the consensus estimate by 8.6% and increased 13.5% from the previous year's quarterly figure.
Total revenues of $2.09 billion beat the consensus mark by 2.8% and improved 4.1% from the previous year’s reported actual. The upside was backed by solid segmental performance, strength from new accounts that came online late last year and the acquisition of RavenVolt. Quarterly revenue growth included 3.8% organic growth and a 0.3% upside from acquisitions.
S&P Global Inc. (SPGI - Free Report) reported impressive third-quarter results, wherein both earnings and revenues beat their respective Zacks Consensus Estimate.
SPGI’s adjusted earnings per share (excluding 88 cents from non-recurring items) of $3.21 rose 9.6% year over year and beat the consensus estimate by 5.3%. Revenues of $3.08 billion surpassed the consensus mark by 2% and improved 8% year over year, backed by strong performance in each of its divisions.
Verisk Analytics Inc.(VRSK - Free Report) reported impressive third-quarter 2023 results, wherein both earnings and revenues beat their respective Zacks Consensus Estimate.
VRSK’s adjusted earnings (excluding 23 cents from non-recurring items) were $1.52 per share, which beat the consensus estimate and increased 4.1% from the year-ago reported figure. This outperformance was due to strong growth in Underwriting Data Solutions, Life Insurance and Extreme Event Solutions.