News

Paychex, Inc. PAYX has reported mixed third-quarter fiscal 2024 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same.

PAYX’s earnings of $1.38 per share beat the Zacks Consensus Estimate by 1.5% and increased 7% from the year-ago quarter. Total revenues of $1.4 billion missed the consensus estimate by 1.4% but increased 4.2% from the year-ago quarter.

Quarter in Detail

Revenues from the Management Solutions segment increased 2% year over year to $1 billion, missing our estimate by a slight margin. Professional employer organization (“PEO”) and Insurance Solutions’ revenues totaled $345.5 million, up 8% from the year-ago quarter. The figure missed our estimate of $349.6 million.

Paychex, Inc. Price, Consensus and EPS Surprise

Service revenues of $1.4 billion moved up 4% from the year-ago quarter, missing our estimate by a slight margin. Interest on funds held for clients increased 25% year over year to $43.9 million, surpassing our estimate of $35.6 million.

EBITDA of $694.6 million increased 6% from the year-ago quarter and surpassed our estimate of $691.8 million. Operating income increased 6% year over year to $649.8 million, beating our estimate of $642.4 million. The operating margin was 45.1%, up 80 basis points from the year-ago quarter. It surpassed our anticipation of 44%.

Balance Sheet & Cash Flow

Paychex exited the quarter with cash and cash equivalents of $1.7 billion compared with $1.4 billion at the end of the preceding quarter. The long-term debt totaled $798.5 million compared with $798.4 million in second-quarter fiscal 2024.

Cash generated from operating activities amounted to $671.7 million, while capital expenditure totaled $40.7 million

2024 Guidance

PAYX has reaffirmed its adjusted EPS guidance for fiscal 2024. Adjusted EPS is expected to grow 10-11% year over year. The company expects total revenues to rise 5-6% compared with 6-7% growth mentioned previously.

Management Solutions’ revenues are expected to increase 3.5-4% year over year compared with the 5-6% rise mentioned previously. The company anticipates PEO and Insurance Solutions’ revenues to grow 7-9%. It expects Interest on funds held for clients to be $140-$150 million. The operating margin is projected at 41-42%.

Currently, Paychex carries a Zacks Rank #4 (Sell).

Earnings Snapshots of Peers

FTI Consulting, Inc. FCN reported better-than-expected fourth-quarter 2023 results.

FCN’s earnings per share of $2.28 surpassed the Zacks Consensus Estimate by 45.2% and increased 50% on a year-over-year basis. Total revenues of $924.7 million beat the consensus mark by 11.5% and increased 19.4% from the year-ago quarter.

TransUnion TRU reported impressive fourth-quarter 2023 results.

TRU’s EPS of 70 cents per share (adjusting 67 cents from non-recurring items) surpassed the consensus mark by 14.8% in the fourth quarter and was flat on a year-over-year basis. Total revenues of $954.3 million surpassed the consensus mark by 3% and increased 5.8% year over year on a reported basis. Revenues rose 5% on a constant-currency basis, mainly driven by strength in the international markets.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.