Earnings Preview: Paychex Inc. - Analyst Blog
24 Septiembre 2012 - 4:00AM
Zacks
Paychex Inc.
(PAYX), specializing in payment processing services, is scheduled
to announce its first quarter fiscal 2013 results on September 24
after the closing bell, and we notice limited movement in estimates
at this point.
Fourth Quarter
Overview
Paychex delivered modest fourth
quarter 2012 results, with earnings of 34 cents per share, in line
with the Zacks Consensus Estimate. The 3.6% increase from the
year-ago quarter was on account of revenue improvement across all
its segments, partially offset by low new business generation.
Revenues grew 5.5% year over year,
backed by increases of 11.5% in Human Resource Service revenue and
3.5% in Payroll Service revenue.
Despite higher operating expenses,
operating margin increased 70 basis points year over year owing to
favorable mix.
Outlook
Paychex appeared to be a bit
cautious as far as its fiscal 2013 guidance is concerned. Keeping
in view the current market and economic condition, Paychex believes
that checks per client will moderate through fiscal 2013. But this
will be partially offset by modest client growth and improved
revenue per check. Also, Human Resources organic revenue growth
will follow the historical trend.
Agreement of
Analysts
Out of the 17 and 23 analysts
providing estimates for the first quarter and fiscal 2013,
respectively, we noticed absolutely no revision in the past 30
days. No estimate revisions were either noticed for fiscal 2014.
The limited movement since Paychex reported fourth quarter results
suggests that there is a lack of driving events.
But some analysts prefer to remain
cautious based on management’s commentary regarding the
sluggishness of new small-business formation. Moreover, a few
analysts think that aggressive pricing from Automated Data
Processing Inc. (ADP) is stealing customers away from
Paychex.
The time difference between when
the company receives payments from its clients and pays it out to
employees typically earns some interest for Paychex. Now, with the
government contemplating lower interest rates, this quick income
stream of the company will also be restricted.
However, some analysts are positive
about Paychex’s efforts to be technologically advanced by launching
mobile apps for Apple Inc.’s (AAPL) iPad and Android tablets, which
allows its users to use the apps whether they are using a personal
computer or laptop. In addition, Paychex launched smartphone
applications targeting both employers and employees who are always
on the move.
Magnitude of Estimate
Revisions
There was no change in the Zacks
Consensus Estimate for the first quarter and fiscal 2013 in the
past 30 days. But the estimates moved down by 2 cents each to 41
cents and $1.61 for the first quarter and fiscal 2013, respectively
in the past 90 days. The estimate for fiscal 2014 plunged 5 cents
to $1.71 in the past 90 days.
Recommendation
We are encouraged by management’s
commentary regarding continued investments in product development
and focus toward building sales force to support revenue
growth.
But lingering unemployment
situation, strict interest rates and stiff competition from
Automated Data Processing and Insperity (NSP),
keep us concerned. However, Paychex’ zero European exposure will be
beneficial for the company.
Paychex has a Zacks # 3 Rank,
implying a short-term Hold rating.
AUTOMATIC DATA (ADP): Free Stock Analysis Report
INSPERITY INC (NSP): Free Stock Analysis Report
PAYCHEX INC (PAYX): Free Stock Analysis Report
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