Paychex Q3 Earnings, Upbeat Outlook Were Not Enough

By Chris Lange Updated Jan 12, 2:05AM EST · Published Mar 26, 10:15AM EDT

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Paychex Q3 Earnings, Upbeat Outlook Were Not Enough — © pecaphoto77 / iStock

Paychex Inc. (NASDAQ: PAYX) released its fiscal third-quarter financial results before the markets opened on Monday. The company said that it had $0.63 in earnings per share (EPS) on $866.5 million in revenue, which compares with consensus estimates from Thomson Reuters of $0.63 in EPS on revenue of $854.5 million. In the same period of last year, Paychex said it had EPS of $0.55 and $795.8 million in revenue.

During the most recent quarter, payroll service revenue was $455.0 million, a 2% increase compared to the same period of last year. The increase was driven primarily by growth in revenue per check, which improved as a result of price increases, net of discounts.

Human Resource Services revenue increased 17% to $393.4 million for the third quarter. This revenue growth was primarily driven by increases in client bases across the following human capital management services: comprehensive human resource outsourcing services, including HROI; retirement services; time and attendance; and insurance services.

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In terms of the outlook for the fiscal 2018 year, EPS is expected to grow in the range of 15% to 16% year over year while total revenues are expected to grow roughly 7%. The consensus estimates are $2.48 in EPS on $3.36 billion in revenue for the full year.

On the books, Paychex’s cash and cash equivalents totaled $323.9 million at the end of the quarter, up from $184.6 million at the end of the previous fiscal year.

Martin Mucci, president and chief executive, commented:

We continued to experience solid growth in the third quarter across all major human capital management (HCM) product lines. In particular, comprehensive human resource (HR) outsourcing solutions, retirement services, insurance services, and our time and attendance solutions have performed well. Our service delivery also remained strong as we continue to experience favorable client retention results. We benefited from the Tax Act enacted in December 2017, the most comprehensive tax reform legislation approved in more than two decades. The benefits of tax reform and the products and solutions we provide to our clients continue to strengthen and enhance our market-leading position.

After being up handily in the premarket, shares of Paychex were last seen down more than 1% at $60.87 on Monday. The consensus analyst price target is $67.68 and a 52-week range is $54.20 to $73.10.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.