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Paycom (PAYC) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

Paycom PAYC is set to report fourth-quarter 2018 results on Feb 5.

The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four reported quarters and matched it once, the average positive surprise being 13.02%.

In the last reported quarter, the company’s non-GAAP earnings per share came in at 52 cents per share, which met the Zacks Consensus Estimate and soared 79.3% from the year-ago quarter.

Moreover, revenues of $133.3 million surged 31.6% from the year-ago quarter and also surpassed the Zacks Consensus Estimate of $130.5 million.

What to Expect in Q4

For fourth-quarter 2018, Paycom expects revenues in the range of $142.5-$144.5 million.  The Zacks Consensus Estimate is pegged at $143.9 million, indicating a 26.2% increase from the year-earlier quarter.

The Zacks Consensus Estimate for earnings stands at 56 cents per share, reflecting a rise of 93% on a year-over-year basis. 

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

Factors at Play

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

Notably, the company is gaining a foothold among larger companies. As a result, it expanded its proactive sales effort to target companies with 50-5000 employees as compared to the earlier aim of 50-2000 employees. The company’s solutions can therefore compete in larger accounts more effectively, thereby boosting its top-line growth.

However, intensifying competition from companies like Automatic Data Processing ADP, Paylocity Holding PCTY, Intuit INTU and Paychex remains a headwind, which could induce pricing pressure and affect Paycom’s margins. Notably, improvement in ADP’s retention rate and a transition of all its mid-market customers to internal SaaS solutions is a major threat to Paycom, which lured away customers from the former.

Additionally, higher sales and marketing expense in the fourth quarter due to the company’s national advertising campaign are likely to keep margins stressed.

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

Paycom Software, Inc. Price and EPS Surprise

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

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