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Paychex shares fall on weak 4Q, guidance

NEW YORK (AP) -- Paychex Inc. shares fell Thursday after the payroll processor reported a flat profit for its most recent quarter, falling short of Wall Street predictions, and issued a disappointing outlook for the full year.

THE SPARK: For the three months ended May 31, Paychex earned 34 cents per share, which was 3 cents less than analysts polled by FactSet expected.

For the current year, which runs through May 2014, Paychex predicted that its net income will grow between 8 and 9 percent, to about $615 million to $620 million. Analysts predicted $621 million.

THE BIG PICTURE: The flat quarterly profit stemmed from higher costs that offset a 6 percent increase in revenue.

Expenses rose 5 percent, to $373.5 million, as the company spent more on developing new products and general and sales costs grew. Income taxes increased 21 percent, to $89.7 million.

THE ANALYSIS: The lower-than-expected profit and outlook didn't faze analysts, with a handful of them backing middle-of-the-road ratings for the stock.

"The business appears to be on track on the whole, although still lacking a catalyst," Joseph Foresi of Janney Capital Markets, who backed his "Neutral" rating for the stock, wrote in a note to investors.

THE SHARES: Down $2.21, or 5.8 percent, to $35.78 in heavy midday trading after falling as low as $35.76 earlier in the day. Over the past 52 weeks, the company's shares have traded between $30.54 and $38.66.