A month has gone by since the last earnings report for Paycom Software (PAYC Quick QuotePAYC - Free Report) . Shares have lost about 4.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Paycom due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Paycom Q1 Earnings and Revenues Surpass Estimates

Paycom reported first-quarter 2024 results, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate and improved year over year.

The online payroll and human resource technology provider reported non-GAAP earnings of $2.59 per share in the first quarter, beating the Zacks Consensus Estimate of $2.43. The bottom line improved 5.28% from $2.46 per share reported in the year-ago quarter.

Paycom reported revenues of $499.9 million, beating the consensus mark of $495.9 million. The top line climbed 10.7% year over year. The top-line figure also surpassed management’s guidance of $494-$497 million, primarily driven by new logo wins.

Quarter in Detail

Paycom’s Recurring revenues (representing 98.4% of the total revenues) improved 9.7% to $491.9 million in the first quarter. Our estimate for the company’s Recurring revenues was pegged at $488.4 million.

The company’s revenues from the Implementation and Other segment improved to $7.98 million from $7.2 million in the year-ago quarter and contributed 1.6% to total sales. Our estimate for the segment’s revenues was pegged at $7.7 million.

Adjusted gross profits climbed 9.12% from the year-ago period to $424.2 million. However, the adjusted gross margin contracted 120 basis points (bps) on a year-over-year basis to 84.9%.

Paycom’s adjusted EBITDA increased 4.1% year over year to $229.5 million. The adjusted EBITDA margin contracted 290 bps to 45.9%.

Balance Sheet & Cash Flow

Paycom exited the first quarter with cash and cash equivalents of $371.3 million compared with $294 million recorded in the previous quarter. The company had no debt as of Mar 31, 2024, as it paid off all its long-term debt at the end of 2023.

In the first quarter of 2024, PAYC generated an operating cash flow of approximately $148.6 million, paid out $21.2 million in dividends and bought back $3.1 million worth of its common stock.

The company had $796 million remaining under its buyback authorization as of Mar 31, 2024. Paycom’s board has approved its upcoming quarterly dividend of 37.5 cents per share, payable in the middle of June 2024.

Guidance

For the second quarter of 2024, Paycom forecasts revenues in the range of $434-$438 million and expects adjusted EBITDA between $151 million and $155 million.

For 2024, PAYC forecasts revenues in the band of $1.860-$1.885 billion and expects adjusted EBITDA between $720 million and $730 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Paycom has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Paycom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Paycom belongs to the Zacks Internet - Software industry. Another stock from the same industry, Pinterest (PINS Quick QuotePINS - Free Report) , has gained 2.2% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.

Pinterest reported revenues of $739.98 million in the last reported quarter, representing a year-over-year change of +22.8%. EPS of $0.20 for the same period compares with $0.08 a year ago.

Pinterest is expected to post earnings of $0.28 per share for the current quarter, representing a year-over-year change of +33.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +25%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Pinterest. Also, the stock has a VGM Score of C.