We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Paychex (PAYX) Earnings & Revenues Beat Estimates in Q2
Read MoreHide Full Article
Paychex, Inc. (PAYX - Free Report) reported solid second-quarter fiscal 2020 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate.
Adjusted earnings of 70 cents per share outpaced the consensus estimate by 2.9% and increased 8% on a year-over-year basis. Total revenues of $990.7 billion beat the consensus mark by 0.4% and increased 15% year over year.
The company witnessed solid growth in its human resource (“HR”) outsourcing services, time and attendance solutions and retirement services.
So far this year, shares of Paychex have rallied 30.8% compared with 28.3% growth of the industry it belongs to and 26.1% increase of the Zacks S&P 500 composite.
Revenues in Detail
Revenues from Management Solutions increased 6% year over year to $726.7 million. Growth was driven by increase in the company’s client base and revenue per client. Under Management Solutions, retirement services’ revenues benefited from an increase in the asset fee revenues earned on the asset value of participants’ funds.
PEO and insurance services revenues were $244.1 million, up 57% from the year-ago quarter. The uptick was driven by contribution from Oasis acquisition and growth in clients and client worksite employees across the company’s PEO business. Insurance Services revenue growth was due to rise in the number of health and benefit clients and applicants, partially offset by softness in the workers’ compensation market as state insurance fund rates declined.
Furthermore, interest on funds held for clients increased 9% year over year to $19.9 million on higher realized gains, average investment balances and average interest rates.
Operating Performance
Operating income increased 11% year over year to $341.7 million. However, operating income margin declined to 34.5% from 35.8% in the year-ago quarter.
EBITDA of $398.8 million improved 16% year over year. EBITDA margin of 40% was flat year over year.
Balance Sheet & Cash Flow
Paychex exited second-quarter fiscal 2020 with cash and cash equivalents of $600.6 million compared with $586.4 million at the end of the prior quarter. Long-term debt of $796.6 million was flat year over year. Cash provided by operating activities was $269.8 million in the reported quarter.
During the reported quarter, the company paid out $222 million in dividends.
Fiscal 2020 View
For fiscal 2020, Paychex expects PEO and insurance services revenues to register 25-30% growth compared with the prior guided growth rate of 30%. Management solutions revenues are anticipated to register 5-5.5% growth compared with the prior guided growth rate of 5%.
Long-term expected EPS (three to five years) growth rate for Cardtronics and Global Payments, FactSet Research Systems is 4%, 18% and 9%, respectively.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers “Most Likely for Early Price Pops.”
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.6% per year. So be sure to give these hand-picked 7 your immediate attention.
Image: Bigstock
Paychex (PAYX) Earnings & Revenues Beat Estimates in Q2
Paychex, Inc. (PAYX - Free Report) reported solid second-quarter fiscal 2020 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate.
Adjusted earnings of 70 cents per share outpaced the consensus estimate by 2.9% and increased 8% on a year-over-year basis. Total revenues of $990.7 billion beat the consensus mark by 0.4% and increased 15% year over year.
The company witnessed solid growth in its human resource (“HR”) outsourcing services, time and attendance solutions and retirement services.
So far this year, shares of Paychex have rallied 30.8% compared with 28.3% growth of the industry it belongs to and 26.1% increase of the Zacks S&P 500 composite.
Revenues in Detail
Revenues from Management Solutions increased 6% year over year to $726.7 million. Growth was driven by increase in the company’s client base and revenue per client. Under Management Solutions, retirement services’ revenues benefited from an increase in the asset fee revenues earned on the asset value of participants’ funds.
PEO and insurance services revenues were $244.1 million, up 57% from the year-ago quarter. The uptick was driven by contribution from Oasis acquisition and growth in clients and client worksite employees across the company’s PEO business. Insurance Services revenue growth was due to rise in the number of health and benefit clients and applicants, partially offset by softness in the workers’ compensation market as state insurance fund rates declined.
Furthermore, interest on funds held for clients increased 9% year over year to $19.9 million on higher realized gains, average investment balances and average interest rates.
Operating Performance
Operating income increased 11% year over year to $341.7 million. However, operating income margin declined to 34.5% from 35.8% in the year-ago quarter.
Paychex, Inc. Price, Consensus and EPS Surprise
Paychex, Inc. price-consensus-eps-surprise-chart | Paychex, Inc. Quote
EBITDA of $398.8 million improved 16% year over year. EBITDA margin of 40% was flat year over year.
Balance Sheet & Cash Flow
Paychex exited second-quarter fiscal 2020 with cash and cash equivalents of $600.6 million compared with $586.4 million at the end of the prior quarter. Long-term debt of $796.6 million was flat year over year. Cash provided by operating activities was $269.8 million in the reported quarter.
During the reported quarter, the company paid out $222 million in dividends.
Fiscal 2020 View
For fiscal 2020, Paychex expects PEO and insurance services revenues to register 25-30% growth compared with the prior guided growth rate of 30%. Management solutions revenues are anticipated to register 5-5.5% growth compared with the prior guided growth rate of 5%.
Zacks Rank & Other Stocks to Consider
Currently, Paychex carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader Zacks Business Services sector are Cardtronics , Global Payments (GPN - Free Report) and FactSet Research Systems Inc. (FDS - Free Report) . While Cardtronics sports a Zacks Rank #1 (Strong Buy), Global Payments and FactSet Research Systems carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term expected EPS (three to five years) growth rate for Cardtronics and Global Payments, FactSet Research Systems is 4%, 18% and 9%, respectively.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers “Most Likely for Early Price Pops.”
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.6% per year. So be sure to give these hand-picked 7 your immediate attention.
See 7 handpicked stocks now >>