Barclays Reiterates an 'Equalweight' on Paychex (PAYX); F2Q'12 Preview: Expect Inline Results
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Price: $122.02 -2.7%
Rating Summary:
3 Buy, 14 Hold, 8 Sell
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Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
3 Buy, 14 Hold, 8 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Barclays reiterates an 'Equalweight' on Paychex (NASDAQ: PAYX) price target of $30.00.
Barclays analyst says, "We expect Paychex to report generally inline F2Q'12 results next Tuesday afternoon. We expect management to be generally positive, but also to note that the slow labor market recovery and weak new business creation remain impediments to more rapid growth. Our F2Q'12 estimates include: F2Q'12 revenue and EPS growth of 7.9% and 5.7% y/y to $552 million and $0.39. These estimates are slightly higher than consensus' $551.7 million and $0.38. We estimate segment revenues as follows: Payroll +5.1% y/y to $375 million, Human Resources +15% to $167 million, and client fund interest -15% to $10.2 million. We expect PAYX's operating margin to contract 25 bps y/y to 39.6%, or increase +5 bps y/y to 38.4% excluding client float interest."
"We believe that PAYX deserves a premium valuation vs. the market due to its strong profitability and financial returns, overcapitalized balance sheet, solid long-term growth prospects, and attractive 4.3% dividend yield. However, with only modest job growth and likely flat interest rates until well into CY'13, PAYX is unlikely to generate more than moderate EPS and free cash flow growth over the next 12 months. As a result, at a 50%+ premium to the market, we find it fairly valued."
For an analyst ratings summary and ratings history on Paychex click here. For more ratings news on Paychex click here.
Shares of Paychex closed at $29.50 yesterday.
Barclays analyst says, "We expect Paychex to report generally inline F2Q'12 results next Tuesday afternoon. We expect management to be generally positive, but also to note that the slow labor market recovery and weak new business creation remain impediments to more rapid growth. Our F2Q'12 estimates include: F2Q'12 revenue and EPS growth of 7.9% and 5.7% y/y to $552 million and $0.39. These estimates are slightly higher than consensus' $551.7 million and $0.38. We estimate segment revenues as follows: Payroll +5.1% y/y to $375 million, Human Resources +15% to $167 million, and client fund interest -15% to $10.2 million. We expect PAYX's operating margin to contract 25 bps y/y to 39.6%, or increase +5 bps y/y to 38.4% excluding client float interest."
"We believe that PAYX deserves a premium valuation vs. the market due to its strong profitability and financial returns, overcapitalized balance sheet, solid long-term growth prospects, and attractive 4.3% dividend yield. However, with only modest job growth and likely flat interest rates until well into CY'13, PAYX is unlikely to generate more than moderate EPS and free cash flow growth over the next 12 months. As a result, at a 50%+ premium to the market, we find it fairly valued."
For an analyst ratings summary and ratings history on Paychex click here. For more ratings news on Paychex click here.
Shares of Paychex closed at $29.50 yesterday.
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