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Paychex (PAYX) Up 3.8% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Paychex (PAYX - Free Report) . Shares have added about 3.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Paychex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important catalysts.
Paychex's Q4 Earnings Beat Estimates
Paychex has reported impressive fourth-quarter fiscal 2025 results, wherein earnings and revenues beat the Zacks Consensus Estimate.
PAYX’s fiscal fourth-quarter earnings of $1.19 per share beat the Zacks Consensus Estimate by a slight margin and increased 6.3% from the year-ago quarter. Total revenues of $1.4 billion surpassed the consensus estimate by a slight margin and gained 10% from the year-ago quarter.
PAYX's Quarterly Performance
Revenues from the Management Solutions segment increased 12% year over year to $1 billion, beating our estimate of $979 million. Paycor's buyout and higher revenues per client, resulting from price realization and product penetration, facilitated this growth.
Professional employer organization (“PEO”) and Insurance Solutions’ revenues were $340.3 million, up 4% from the year-ago quarter. The figure met our estimate. Growth in the number of average PEO worksite employees and a surge in PEO insurance revenues contributed to this segment’s growth.
Service revenues gained 10% year over year to $1.4 billion, exceeding our projection of $1.3 billion. Interest on funds held for clients rose 18% from the year-ago quarter to $45.2 million, surpassing our estimation of $37.4 million.
EBITDA of $518.2 million dropped 1% from the year-ago quarter, missing our estimate of $657.9 million. Operating income decreased 11% year over year to $431.1 million, missing our projection of $615.4 million. The operating margin was 30.2%, down 700 basis points from the year-ago quarter. The reported figure beat our estimate of 43.5%.
Balance Sheet & Cash Flow of Paychex
The company exited the fourth quarter of fiscal 2025 with cash and cash equivalents of $1.6 billion, flat with the preceding quarter. The long-term debt totaled $4.5 billion compared with $799 million in the third quarter of fiscal 2025.
Cash generated from operating activities amounted to $394 million, while the capital expenditure totaled $60.5 million.
PAYX's FY25 Guidance
Paychex expects revenues to grow 16.5-18.5%. The management raised its expectation for interest on funds held for clients to $190-$200 million compared with the preceding quarter’s view of $145-$155 million.
Adjusted earnings of 99 cents per share beat the Zacks Consensus Estimate by 4.2% and increased 8.8% on a year-over-year basis. Total revenues of $1.2 billion also beat the Zacks Consensus Estimate by 0.5% and increased 7.4% year over year.
Revenues in Detail
Revenues from Management Solutions segment increased 8% year over year to $895.3 million. The segment benefited from growth in the number of client employees served for human capital management (HCM) and additional worksite employees for HR Solutions. Also, improved revenue per client on price realization and higher product penetration, strong demand for HR Solutions, retirement, time and attendance solutions and expansion of HCM ancillary services acted as tailwinds.
Professional employer organization (“PEO”) and Insurance Solutions’ revenues were $273.3 million, up 4% from the year-ago quarter’s level. The uptick was owing to growth in the number of average worksite employees. Interest on funds held for clients increased 54% year over year to $21.7 million.
Operating Performance
Operating income increased 7% year over year to $472.3 million. EBITDA of $518.6 million increased 4.7% year over year.
Balance Sheet & Cash Flow
Paychex exited second-quarter fiscal 2022 with cash and cash equivalents of $1.1 billion compared with $1.18 billion reported at the end of the prior quarter. Long-term debt was $797.9 million compared with $797.8 million in the prior quarter. Cash provided by operating activities was $321.6 million in the reported quarter. During the reported quarter, PAYX paid out $284.7 million as dividends.
Fiscal 2023 View Tweaked
Paychex upped its adjusted earnings per share view with respect to year-over-year growth for fiscal 2023. Adjusted EPS is now expected to register 12-14% growth compared with the prior expectation of 11-12% growth. PAYX continues to expect total revenues to register 8% (prior view: 7-8%) growth. Management Solutions’ revenues are expected to grow 7-8% (prior view: 5-7%). PEO and Insurance Solutions’ revenues are expected to grow 5-7% (prior view: 8-10%).
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Paychex has a poor Growth Score of F, a score with the same score on the momentum front. Charting a somewhat similar path, the stock has a grade of D on the value side, putting it in the bottom 40% for value investors.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Paychex has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Paychex (PAYX) Up 3.8% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Paychex (PAYX - Free Report) . Shares have added about 3.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Paychex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important catalysts.
Paychex's Q4 Earnings Beat Estimates
Paychex has reported impressive fourth-quarter fiscal 2025 results, wherein earnings and revenues beat the Zacks Consensus Estimate.
PAYX’s fiscal fourth-quarter earnings of $1.19 per share beat the Zacks Consensus Estimate by a slight margin and increased 6.3% from the year-ago quarter. Total revenues of $1.4 billion surpassed the consensus estimate by a slight margin and gained 10% from the year-ago quarter.
PAYX's Quarterly Performance
Revenues from the Management Solutions segment increased 12% year over year to $1 billion, beating our estimate of $979 million. Paycor's buyout and higher revenues per client, resulting from price realization and product penetration, facilitated this growth.
Professional employer organization (“PEO”) and Insurance Solutions’ revenues were $340.3 million, up 4% from the year-ago quarter. The figure met our estimate. Growth in the number of average PEO worksite employees and a surge in PEO insurance revenues contributed to this segment’s growth.
Service revenues gained 10% year over year to $1.4 billion, exceeding our projection of $1.3 billion. Interest on funds held for clients rose 18% from the year-ago quarter to $45.2 million, surpassing our estimation of $37.4 million.
EBITDA of $518.2 million dropped 1% from the year-ago quarter, missing our estimate of $657.9 million. Operating income decreased 11% year over year to $431.1 million, missing our projection of $615.4 million. The operating margin was 30.2%, down 700 basis points from the year-ago quarter. The reported figure beat our estimate of 43.5%.
Balance Sheet & Cash Flow of Paychex
The company exited the fourth quarter of fiscal 2025 with cash and cash equivalents of $1.6 billion, flat with the preceding quarter. The long-term debt totaled $4.5 billion compared with $799 million in the third quarter of fiscal 2025.
Cash generated from operating activities amounted to $394 million, while the capital expenditure totaled $60.5 million.
PAYX's FY25 Guidance
Paychex expects revenues to grow 16.5-18.5%. The management raised its expectation for interest on funds held for clients to $190-$200 million compared with the preceding quarter’s view of $145-$155 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Paychex has a poor Growth Score of F, a score with the same score on the momentum front. Charting a somewhat similar path, the stock has a grade of D on the value side, putting it in the bottom 40% for value investors.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Paychex has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.