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Paychex (PAYX) Q4 Earnings & Revenues Beat, Up Y/Y

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

Adjusted earnings of 81 cents per share beat the Zacks Consensus Estimate by 2.5% and increased 12.5% on a year-over-year basis. Total revenues of $1.15 billion beat the consensus mark by 2.9% and increased 11.2% year over year.

Over the past year, shares of Paychex have gained 11.8% compared with 6.4% growth of the industry it belongs to and 9.4% decline of the Zacks S&P 500 composite.

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Revenues in Detail

Revenues from Management Solutions increased 12% year over year to $845.3 million. The segment benefited from growth in the company’s payroll client bases and product penetration across human capital management ("HCM") offerings resulting from strong sales performance and high levels of retention; high demand for HR Solutions; improved revenues per client resulting from higher employment levels within the company’s client base and enhanced price realization; and expansion of HCM ancillary services.

Professional employer organization (“PEO”) and Insurance Solutions revenues were $284.3 million, up 10% from the year-ago quarter. The uptick was due to an increase in average worksite employees, a rise in average wages per worksite employee, higher revenues on state unemployment insurance and a rise in PEO health insurance revenues.

Interest on funds held for clients increased 2% year over year to $14.7 million.

Operating Performance

Adjusted operating income increased 11% year over year to $394 million.

Adjusted EBITDA of $445.2 million increased 11% year over year.

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

Balance Sheet & Cash Flow

Paychex exited fourth-quarter fiscal 2022 with cash and cash equivalents of $370 million compared with $267.5 million at the end of the prior quarter. Long-term debt was $797.7 million compared with $797.6 million in the prior quarter.

Cash provided by operating activities was $337.2 million in the reported quarter. During the reported quarter, the company paid out $284.7 million in dividends.

Fiscal 2023 View

For fiscal 2023, total revenues are expected to register 7-8% growth. Adjusted earnings per share are expected to register 9-10% growth.

Management Solutions revenues are now expected to grow 5-7%. PEO and Insurance Solutions revenues are expected to grow 8-10%.

The adjusted operating margin is expected to grow 40-41%. Adjusted EBITDA margin is expected to be nearly 44%.

Currently, Paychex carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Business Services Companies

Omnicom Group OMC reported impressive first-quarter 2022 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.

Omnicom’s earnings of $1.39 per share beat the consensus mark by 8.6% and increased 4.5% year over year, driven by strong margin performance.

Omnicom’s total revenues of $3.4 billion surpassed the consensus estimate by 5.4% but declined slightly year over year.

Equifax EFX reported better-than-expected first-quarter 2022 results.

Equifax’s adjusted earnings of $2.22 per share beat the Zacks Consensus Estimate by 3.3% and improved 13% on a year-over-year basis. The reported figure exceeded the guided range of $2.08-$2.18.

Equifax’s revenues of $1.36 billion outpaced the consensus estimate by 2.4% and improved 12.4% year over year on a reported basis and 13% on a local-currency basis. The reported figure exceeded the guided range of $1.32-$1.34 billion.

Waste Management WM reported solid first-quarter 2022 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.

Waste Management’s adjusted earnings per share of $1.29 beat the Zacks Consensus Estimate by 15.2% and improved 21.7% year over year.

Waste Management’s total revenues of $4.66 billion beat the consensus estimate by 4.6% and increased 13.4% year over year.


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