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Paycom Tops Q3 Earnings Estimates: Will Strong Results Lift the Stock?
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Paycom Software, Inc. (PAYC - Free Report) reported better-than-expected third-quarter 2024 results. The online payroll and human resource technology provider reported non-GAAP earnings of $1.67 per share for the third quarter, beating the Zacks Consensus Estimate of $1.62.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
However, the bottom line declined 5.6% year over year as the benefits of higher revenues and lower share count were more than offset by increased operating expenses, interest expenses and income taxes.
Paycom reported revenues of $451.9 million, beating the consensus mark of $446.9 million. The top line climbed 11.2% year over year. The figure was also above the high end of management’s guidance of $444-$449 million. The top line benefited from increased sales momentum, international expansion and artificial intelligence (AI) integration in its products.
The stronger-than-expected third-quarter results are likely to give a boost to PAYC stock, which has lagged behind this year’s broader market rally. Shares of Paycom have plunged 16.7% year to date, underperforming the Zacks Internet - Software industry’s gain of 25.7%.
Paycom Software, Inc. Price, Consensus and EPS Surprise
Paycom’s Recurring revenues (representing 98.5% of the total revenues) improved 11.6% to $445 million in the third quarter. Our estimate for the company’s Recurring revenues was pegged at $437.3 million.
The company’s revenues from the Implementation and Other segment declined to $6.9 million from $7.5 million in the year-ago quarter and contributed 1.6% to total sales. Our estimate for the segment’s revenues was pegged at $8.5 million.
Adjusted gross profits increased 8% from the year-ago period to $367.5 million. However, the adjusted gross margin contracted 240 basis points (bps) on a year-over-year basis to 81.3%.
Paycom’s adjusted EBITDA increased 3.4% year over year to $171.3 million. The adjusted EBITDA margin contracted 290 bps to 37.9%.
Paycom’s Balance Sheet & Cash Flow
Paycom exited the third quarter with cash and cash equivalents of $325.8 million compared with $346.5 million recorded in the previous quarter. The company had no debt as of Sept. 30, 2024, as it paid off all its long-term debt at the end of 2023.
In the first three quarters of 2024, PAYC generated an operating cash flow of approximately $373.5 million, paid out $63.7 million in dividends and bought back $122.8 million worth of its common stock.
The company had $1.49 billion remaining under its buyback authorization as of Sept. 30, 2024. Paycom’s board has approved its upcoming quarterly dividend of 37.5 cents per share, payable in the middle of December 2024.
Paycom’s Guidance
For the fourth quarter of 2024, Paycom forecasts revenues in the range of $477-$484 million and expects adjusted EBITDA between $184.5 million and $191.5 million.
For 2024, PAYC now forecasts revenues in the band of $1.866-$1.873 billion compared with the previous guidance of $1.860-$1.875 billion. Paycom now expects its 2024 adjusted EBITDA between $745 million and $752 million, up from the earlier projection of $727-$737 million.
The consensus mark for Shopify’s 2024 earnings has remained unchanged at $1.12 per share over the past 60 days, indicating a 51.4% year-over-year increase. The long-term expected earnings growth rate for the stock stands at 39.2%. Shares of SHOP have increased 2.7% in the year-to-date period.
The Zacks Consensus Estimate for PANW’s fiscal 2025 earnings has been revised upward by a penny to $6.26 per share in the past 60 days, suggesting a year-over-year increase of 10.4%. It has a long-term earnings growth expectation of 19.3%. Shares of PANW have risen 21.9% in the year-to-date period.
The Zacks Consensus Estimate for ServiceNow’s 2024 earnings has been revised upward by 6 cents to $13.87 per share in the past seven days, indicating an increase of 28.7% on a year-over-year basis. It has a long-term earnings growth expectation of 24.70%. Shares of NOW have jumped 34.5% in the year-to-date period.
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Paycom Tops Q3 Earnings Estimates: Will Strong Results Lift the Stock?
Paycom Software, Inc. (PAYC - Free Report) reported better-than-expected third-quarter 2024 results. The online payroll and human resource technology provider reported non-GAAP earnings of $1.67 per share for the third quarter, beating the Zacks Consensus Estimate of $1.62.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
However, the bottom line declined 5.6% year over year as the benefits of higher revenues and lower share count were more than offset by increased operating expenses, interest expenses and income taxes.
Paycom reported revenues of $451.9 million, beating the consensus mark of $446.9 million. The top line climbed 11.2% year over year. The figure was also above the high end of management’s guidance of $444-$449 million. The top line benefited from increased sales momentum, international expansion and artificial intelligence (AI) integration in its products.
The stronger-than-expected third-quarter results are likely to give a boost to PAYC stock, which has lagged behind this year’s broader market rally. Shares of Paycom have plunged 16.7% year to date, underperforming the Zacks Internet - Software industry’s gain of 25.7%.
Paycom Software, Inc. Price, Consensus and EPS Surprise
Paycom Software, Inc. price-consensus-eps-surprise-chart | Paycom Software, Inc. Quote
Paycom’s Third Quarter in Detail
Paycom’s Recurring revenues (representing 98.5% of the total revenues) improved 11.6% to $445 million in the third quarter. Our estimate for the company’s Recurring revenues was pegged at $437.3 million.
The company’s revenues from the Implementation and Other segment declined to $6.9 million from $7.5 million in the year-ago quarter and contributed 1.6% to total sales. Our estimate for the segment’s revenues was pegged at $8.5 million.
Adjusted gross profits increased 8% from the year-ago period to $367.5 million. However, the adjusted gross margin contracted 240 basis points (bps) on a year-over-year basis to 81.3%.
Paycom’s adjusted EBITDA increased 3.4% year over year to $171.3 million. The adjusted EBITDA margin contracted 290 bps to 37.9%.
Paycom’s Balance Sheet & Cash Flow
Paycom exited the third quarter with cash and cash equivalents of $325.8 million compared with $346.5 million recorded in the previous quarter. The company had no debt as of Sept. 30, 2024, as it paid off all its long-term debt at the end of 2023.
In the first three quarters of 2024, PAYC generated an operating cash flow of approximately $373.5 million, paid out $63.7 million in dividends and bought back $122.8 million worth of its common stock.
The company had $1.49 billion remaining under its buyback authorization as of Sept. 30, 2024. Paycom’s board has approved its upcoming quarterly dividend of 37.5 cents per share, payable in the middle of December 2024.
Paycom’s Guidance
For the fourth quarter of 2024, Paycom forecasts revenues in the range of $477-$484 million and expects adjusted EBITDA between $184.5 million and $191.5 million.
For 2024, PAYC now forecasts revenues in the band of $1.866-$1.873 billion compared with the previous guidance of $1.860-$1.875 billion. Paycom now expects its 2024 adjusted EBITDA between $745 million and $752 million, up from the earlier projection of $727-$737 million.
PAYC’s Zacks Rank and Stocks to Consider
Paycom currently carries a Zacks Rank #4 (Sell).
Some top-ranked stocks in the broader technology sector are Shopify (SHOP - Free Report) , Palo Alto Networks (PANW - Free Report) and ServiceNow (NOW - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus mark for Shopify’s 2024 earnings has remained unchanged at $1.12 per share over the past 60 days, indicating a 51.4% year-over-year increase. The long-term expected earnings growth rate for the stock stands at 39.2%. Shares of SHOP have increased 2.7% in the year-to-date period.
The Zacks Consensus Estimate for PANW’s fiscal 2025 earnings has been revised upward by a penny to $6.26 per share in the past 60 days, suggesting a year-over-year increase of 10.4%. It has a long-term earnings growth expectation of 19.3%. Shares of PANW have risen 21.9% in the year-to-date period.
The Zacks Consensus Estimate for ServiceNow’s 2024 earnings has been revised upward by 6 cents to $13.87 per share in the past seven days, indicating an increase of 28.7% on a year-over-year basis. It has a long-term earnings growth expectation of 24.70%. Shares of NOW have jumped 34.5% in the year-to-date period.