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Paychex (PAYX) Q3 Earnings & Revenues Beat, 2022 View Up

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Paychex, Inc. PAYX reported better-than-expected third-quarter fiscal 2022 results.

Adjusted earnings of $1.15 per share beat the Zacks Consensus Estimate by 10.6% and increased 20% on a year-over-year basis. Total revenues of $1.28 billion beat the consensus mark by 4.5% and increased 15% year over year.

Over the past year, shares of Paychex have gained 35.2% compared with 19.4% growth of the industry it belongs to and 17.1% rise of the Zacks S&P 500 composite.

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Revenues in Detail

Revenues from Management Solutions increased 13% year over year to $959.9 million. The segment benefited from growth in the company’s client bases across human capital management ("HCM") offerings resulting from strong sales performance and high levels of retention; higher checks per payroll for HCM services and net gain in worksite employees for HR solutions; improved revenues per client resulting from enhanced price realization; expansion of HCM ancillary services; and growth in payroll funding and outsourcing services for temporary staffing clients.

Professional employer organization (“PEO”) and Insurance Solutions revenues were $301.7 million, up 21% from the year-ago quarter. The uptick was due to an increase in the number of average worksite employees, rise in average wages per worksite employee, higher revenues on state unemployment insurance and rise in PEO health insurance revenues.

Interest on funds held for clients decreased 5% year over year to $14.4 million.

Operating Performance

Adjusted operating income increased 20% year over year to $562.8 million.

Adjusted EBITDA of $611.1 million increased 18% year over year.

Balance Sheet & Cash Flow

Paychex exited third-quarter fiscal 2022 with cash and cash equivalents of $267.5 million compared with $636.2 million at the end of the prior quarter. Long-term debt was $797.6 million compared with $797.5 million in the prior quarter.

Cash provided by operating activities was $612.9 million in the reported quarter. During the reported quarter, the company paid out $238.5 million in dividends.

Paychex, Inc. Price, Consensus and EPS Surprise

Paychex, Inc. Price, Consensus and EPS Surprise
Paychex, Inc. Price, Consensus and EPS Surprise

Paychex, Inc. price-consensus-eps-surprise-chart | Paychex, Inc. Quote

Fiscal 2022 View

For fiscal 2022, total revenues are now expected to register 12-13% growth compared with the prior expectation of 10-11%. Adjusted earnings per share are now expected to register 22.5-23% growth compared with the prior expectation of 18-20%.

Management Solutions revenues are now expected to grow 12-13% compared with the prior expectation of 10-11%. PEO and Insurance Solutions revenues are now expected to grow 13-14% compared with the prior expectation of 10-12%.

Adjusted operating margin is expected to be almost 40% compared with the prior expectation of 39-40%. Adjusted EBITDA margin is now expected to be nearly 44-45% compared with the prior expectation of 44%.

Currently, Paychex carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Business Services Companies

Robert Half International RHI delivered impressive fourth-quarter 2021 results, with earnings and revenues beating the Zacks Consensus Estimate.

Robert Half’s quarterly earnings of $1.51 per share beat the consensus mark by 5.6% and rose 79.8% year over year.

Robert Half’s revenues of $1.77 billion surpassed the consensus mark by 4.3% and increased 36.2% year over year on a reported basis and 36% on an as-adjusted basis.

Automatic Data Processing ADP reported better-than-expected second-quarter fiscal 2022 results.

ADP’s adjusted earnings per share of $1.65 beat the Zacks Consensus Estimate by 1.2% and rose 9% year over year.

ADP’s total revenues of $4.03 billion beat the consensus mark by 1.1% and improved 9% year over year on a reported basis as well as on an organic constant-currency basis.

Rollins ROL reported mixed fourth-quarter 2021 results, with earnings meeting the Zacks Consensus Estimate and revenues beating the same.

Rollins’ adjusted earnings of 14 cents per share met the Zacks Consensus Estimate and increased 7.7% year over year.

Rollins’ revenues of $600.3 million beat the consensus mark by 3.3% and improved 11.9% year over year.


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