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Paycom (PAYC) to Post Q1 Earnings: Is a Beat in the Cards?

Zacks Equity Research

Paycom PAYC is set to report first-quarter 2019 results on Apr 30.

The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 8.7%.

In the last reported quarter, the company’s non-GAAP earnings per share came in at 61 cents per share, which surpassed the Zacks Consensus Estimate of 56 cents. Adjusted earnings per share in the year-ago period were 90 cents.

Moreover, revenues of $150.3 million surged 32% from the year-earlier period and also outpaced the Zacks Consensus Estimate of $144 million, driven by new business wins.

What to Expect in Q1

For first-quarter 2019, Paycom Software expects revenues in the range of $194-$196 million. The Zacks Consensus Estimate is pegged at $195.6 million, indicating a 27% rise from the prior-year reported figure.

The Zacks Consensus Estimate for earnings stands at $1.12 per share, suggesting 17.9% growth from reported numbers in the same period last year.

Let’s see how things are shaping up for the upcoming announcement.

Factors at Play

Paycom consistently benefits from a robust adoption of the advanced human capital management (HCM) solutions across industries and geographies. New business wins and improvement in sales productivity are also other tailwinds for the company ahead of its impending results.

Higher retention rate aided by the mobile app uptake is likely to remain a positive factor for the company this earnings season. Its focus on improving employee engagement with the mobile application is likely to drive the upcoming quarterly release. Further, the addition of a mileage tracker and mobile expense management designed to simplify user experience are upsides on this front.

Continued strength in small business hiring through March 2019, per a survey by the National Federation of Independent Business (NFIB), makes us optimistic about Paycom’s upcoming results.

The company is also gaining a foothold among larger companies. As a result, it expanded its proactive sales effort to target companies with 50-5000 employees. Its solutions can therefore compete in larger accounts more effectively, thereby boosting its top-line growth.

Paycom Software, Inc. Price and EPS Surprise

Paycom Software, Inc. Price and EPS Surprise | Paycom Software, Inc. Quote

What Our Model Says

Our proven Zacks model clearly shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has significant chances of beating estimates if it also has a positiveEarnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Paycom has an Earnings ESP of +3.17% and a Zacks Rank #2, which increases the predictive power of ESP.Moreover, a postitve ESP in the combination indicates that the company is likely to deliver an earnings surprise this time around.

Other Stocks That Warrant a Look

Here are a few other stocks worth considering, which per our model, have the right combination of elements to beat on earnings this reporting cycle:

Amazon.com, Inc. AMZN has an Earnings ESP of +10.65% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Square, Inc. SQ has an Earnings ESP of +5.50% and is a Zacks #2 Ranked player.

Acacia Communications, Inc. ACIA has an Earnings ESP of +5.73% and is a #2 Ranked player.

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