Paychex (PAYX) Shares Rise Following Earnings, No Surprises States Analyst

September 28, 2022 3:12 PM EDT
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Paychex (NASDAQ: PAYX) reported earnings before the bell Wednesday, sending its shares higher, currently up 3%.

The HR and Payroll solutions firm reported second-quarter earnings per share of $1.03, $0.06 better than the analyst estimate of $0.97, while revenue came in at $1.21 billion versus the consensus estimate of $1.18 billion.

"We are off to a good start for fiscal 2023, achieving double-digit growth in revenue and earnings. The value proposition of our Human Capital Management ("HCM") technology and Paychex HR suite continues to resonate in the market, with notable strength in our mid-market, retirement, and HR solutions businesses," said Martin Mucci, Chairman, and CEO of Paychex.

Looking ahead, the company expects adjusted earnings per share to grow in the range of 11% to 12%.

In a note reacting to the report, Cowen analyst Bryan Bergin said: "PAYX posted a solid 1Q w/ revenue 2% ahead, led by MS, and strong EBIT margin supporting a 6% EPS beat. It affirmed FY23 growth & margin views while passing through 1Q EPS beat. Demand commentary cites consistent strength in mid-market, retirement, and HR solutions.

The analyst added that overall, there were no surprises, "and its 930AM call is critical to gauge conservatism in outlook and management tone on demand & macro."

Elsewhere, Stifel analyst David Grossman stated Paychex's "results were modestly better with fundamental data points/trend largely stable."

"FY23 revenue guidance remained unchanged, while annual EPS guidance was raised 2% to reflect F1Q outperformance," wrote Grossman. "PAYX is trading at a 67% premium to the S&P500 versus its pre-pandemic range of 45-55% and down from 85-90% recently. The valuation likely reflects defensive characteristics and while the recent re-rating mitigates some risk, the stock remains fully valued, which creates some rotation risk in a market characterized by a significant shift in economic sentiment."

By Sam Boughedda

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