Paychex, Inc. (NASDAQ: PAYX) reported third-quarter revenue and EPS that were marginally higher than expected Wednesday.
The upside was driven by the recently acquired professional employer organization business, while revenue generation at management solutions missed consensus expectations, according to Guggenheim Securities.
Guggenheim Securities’ Nandan Amladi maintained a Neutral rating on Paychex and raised the price target from $70 to $80.
A focus on technology investments over the past year has positioned the company for improved sales and margins, Amladi said in a Wednesday note.
SurePayroll’s self-service e-commerce site, which recently went live, will enable more online leads to be directly converted into customers, the analyst said. This not only reduces the dependence of live agents, but is expected to boost sales, he said.
A new chatbot technology is being used on the customer support site that's already addressing more than 40 percent of online customer queries, Amladi said.
This number will grow as the chatbot gathers data, the analyst said. This helps reduce support costs, a tailwind to margin expansion, he said.
The Oasis acquisition gives Paychex greater scale in insurance rates, Amladi said. The integration seems to be progressing well, and early guidance from the company for 2020 suggests that this segment will drive most of the growth next year, he said.
Paychex may have achieved a good combination of growth and margins, but it is lagging the overall human capital management software sector, according to Guggenheim.
Paychex shares were trading down slightly at $79.25 at the time of publication Thursday.
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Earnings Scheduled For March 27, 2019
Latest Ratings for PAYX
|Mar 2019||Credit Suisse||Maintains||Outperform||Outperform|
|Jan 2019||Bank of America||Upgrades||Underperform||Neutral|
|Nov 2018||Barclays||Initiates Coverage On||Equal-Weight|
View More Analyst Ratings for PAYX
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