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Paycom (PAYC) to Report Q2 Earnings: What's in the Cards?

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Paycom (PAYC - Free Report) is set to report second-quarter 2019 results on Jul 30.

The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and matched it once, the average positive surprise being 8.9%.

In the last reported quarter, the company’s non-GAAP earnings per share came in at $1.19 per share, which surpassed the Zacks Consensus Estimate of $1.12 and also grew 24% year over year.

Further, the company generated revenues of $199.9 million, which surged 30% from the year-earlier period and outpaced the Zacks Consensus Estimate of $196 million as well, driven by new business wins.

What to Expect in Q2

For second-quarter 2019, Paycom Software expects revenues in the range of $162.5-$164.5 million. The Zacks Consensus Estimate is pegged at $163.96 million, indicating a 27.3% rise from the prior-year reported figure.

The Zacks Consensus Estimate for earnings stands at 71 cents, suggesting 20.3% growth from the reported number in the same period last year.

Paycom Software, Inc. Price and EPS Surprise

Paycom Software, Inc. Price and EPS Surprise

Paycom Software, Inc. price-eps-surprise | Paycom Software, Inc. Quote

Let’s see how things are shaping up for the upcoming announcement.

Factors at Play

Paycom’s second-quarter results are expected to be driven by the company’s strong software offering, focused sales efforts and its concentrated employee usage strategy.

Robust adoption of the enhanced Human Capital Management (HCM) software solutions across industries and geographies is anticipated to remain a key catalyst.

Management is also optimistic about strong client additions within the upper end of the company’s market, which would be up to 5,000. The launch of Direct Data Exchange for all Paycom clients in the last reported quarter is also likely to boost client wins this earnings season.

Moreover, the company’s focus on improving its user engagement is likely to aid retention in the soon-to-be-reported quarter.

We note that in the last reported quarter, Paycom revenues benefited from solid growth in recurring revenues, which comprised around 98% of total revenues. This will probably remain a tailwind in the upcoming quarterly results as well.

However, intensifying competition from players like Automatic Data Processing (ADP - Free Report) , Paylocity (PCTY - Free Report) and Workday (WDAY - Free Report) remain key concerns.

Paycom currently carries a Zacks Rank #2 (Buy). Youcan see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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