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Why Is Paychex (PAYX) Down 2.8% Since Last Earnings Report?
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A month has gone by since the last earnings report for Paychex (PAYX - Free Report) . Shares have lost about 2.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Paychex due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent catalysts for Paychex, Inc. before we dive into how investors and analysts have reacted as of late.
Paychex's Q3 Earnings Beat Estimates
Paychex reported impressive third-quarter fiscal 2026 results, with both earnings and revenues beating the Zacks Consensus Estimate.
PAYX’s fiscal third-quarter earnings of $1.71 per share beat the Zacks Consensus Estimate by 1.8% and increased 14.8% from the year-ago quarter. Total revenues came in at $1.80 billion, surpassing the consensus estimate by 1.4% and increasing 19.9% from the year-ago quarter.
PAYX’s Quarterly Performance
Revenues from the Management Solutions segment improved 23% year over year to $1.35 billion, meeting our estimate.
Professional employer organization (“PEO”) and Insurance Solutions’ revenues were $397.5 million, increasing 9% from the year-ago quarter. The figure surpassed our estimate of $392.8 million.
Service revenues rose 20% year over year to $1.75 billion, beating our estimated figure of $1.74 billion. Interest on funds held for clients grew 33% from the year-ago quarter to $56.8 million, beating our projection of $45.8 million.
EBITDA of $902.9 million increased 23% from the year-ago quarter, exceeding our estimate of $888.9 million. Operating income rose 14% year over year to $792 million, surpassing our forecast of $775.1 million. The operating margin was 43.8%, down 200 basis points from the year-ago quarter. The reported figure beat our estimate of 43.3%.
Balance Sheet & Cash Flow of Paychex
The company exited the third quarter of fiscal 2026 with cash and cash equivalents of $1.74 billion compared with $1.48 billion in the preceding quarter. Long-term debt totaled $4.55 billion, flat compared with the preceding quarter.
Cash generated from operating activities amounted to $812.5 million, while capital expenditure was $51 million.
PAYX’S Updated FY’26 Guidance
Paychex expects revenues to grow 16.5% to 18.5%. Management expects interest on funds held for clients in the range of $200-$210 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?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Paychex has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock has a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. Interestingly, Paychex 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
Paychex belongs to the Zacks Internet - Software industry. Another stock from the same industry, Rubrik, Inc. (RBRK - Free Report) , has gained 7.2% over the past month. More than a month has passed since the company reported results for the quarter ended January 2026.
Rubrik, Inc. reported revenues of $377.68 million in the last reported quarter, representing a year-over-year change of +46.3%. EPS of $0.04 for the same period compares with -$0.18 a year ago.
For the current quarter, Rubrik, Inc. is expected to post a loss of $0.03 per share, indicating a change of +80% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Rubrik, Inc.. Also, the stock has a VGM Score of C.
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Why Is Paychex (PAYX) Down 2.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Paychex (PAYX - Free Report) . Shares have lost about 2.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Paychex due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent catalysts for Paychex, Inc. before we dive into how investors and analysts have reacted as of late.
Paychex's Q3 Earnings Beat Estimates
Paychex reported impressive third-quarter fiscal 2026 results, with both earnings and revenues beating the Zacks Consensus Estimate.
PAYX’s fiscal third-quarter earnings of $1.71 per share beat the Zacks Consensus Estimate by 1.8% and increased 14.8% from the year-ago quarter. Total revenues came in at $1.80 billion, surpassing the consensus estimate by 1.4% and increasing 19.9% from the year-ago quarter.
PAYX’s Quarterly Performance
Revenues from the Management Solutions segment improved 23% year over year to $1.35 billion, meeting our estimate.
Professional employer organization (“PEO”) and Insurance Solutions’ revenues were $397.5 million, increasing 9% from the year-ago quarter. The figure surpassed our estimate of $392.8 million.
Service revenues rose 20% year over year to $1.75 billion, beating our estimated figure of $1.74 billion. Interest on funds held for clients grew 33% from the year-ago quarter to $56.8 million, beating our projection of $45.8 million.
EBITDA of $902.9 million increased 23% from the year-ago quarter, exceeding our estimate of $888.9 million. Operating income rose 14% year over year to $792 million, surpassing our forecast of $775.1 million. The operating margin was 43.8%, down 200 basis points from the year-ago quarter. The reported figure beat our estimate of 43.3%.
Balance Sheet & Cash Flow of Paychex
The company exited the third quarter of fiscal 2026 with cash and cash equivalents of $1.74 billion compared with $1.48 billion in the preceding quarter. Long-term debt totaled $4.55 billion, flat compared with the preceding quarter.
Cash generated from operating activities amounted to $812.5 million, while capital expenditure was $51 million.
PAYX’S Updated FY’26 Guidance
Paychex expects revenues to grow 16.5% to 18.5%. Management expects interest on funds held for clients in the range of $200-$210 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Paychex has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock has a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. Interestingly, Paychex 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
Paychex belongs to the Zacks Internet - Software industry. Another stock from the same industry, Rubrik, Inc. (RBRK - Free Report) , has gained 7.2% over the past month. More than a month has passed since the company reported results for the quarter ended January 2026.
Rubrik, Inc. reported revenues of $377.68 million in the last reported quarter, representing a year-over-year change of +46.3%. EPS of $0.04 for the same period compares with -$0.18 a year ago.
For the current quarter, Rubrik, Inc. is expected to post a loss of $0.03 per share, indicating a change of +80% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Rubrik, Inc.. Also, the stock has a VGM Score of C.