Q3 Earnings Outperformers: Paychex (NASDAQ:PAYX) And The Rest Of The HR Software Stocks
The end of an earnings season can be a great time to assess how companies are handling the current business environment and discover new stocks. Let’s take a look at how Paychex (NASDAQ:PAYX) and the rest of the HR software stocks fared in Q3.
Modern HR software has two powerful benefits: cost savings and ease of use. For cost savings, businesses large and small much prefer the flexibility of cloud-based, web-browser-delivered software paid for on a subscription basis rather than the hassle and complexity of purchasing and managing on-premise enterprise software. On the usability side, the consumerization of business software creates seamless experiences whereby multiple standalone processes like payroll processing and compliance are aggregated into a single, easy-to-use platform.
The 6 HR software stocks we track reported a weak Q3; on average, revenues beat analyst consensus estimates by 2.5% while next quarter's revenue guidance was 3.5% below consensus. Stocks have been under pressure as inflation (despite slowing) makes their long-dated profits less valuable, but HR software stocks held their ground better than others, with share prices down 2.7% on average since the previous earnings results.
Paychex (NASDAQ:PAYX)
One of the oldest service providers in the industry, Paychex (NASDAQ:PAYX) offers its customers payroll and HR software solutions.
Paychex reported revenues of $1.26 billion, up 5.7% year on year, falling short of analyst expectations by 0.7%. It was a weak quarter for the company, with a miss of analysts' revenue estimates and a decline in its gross margin.
President and Chief Executive Officer , John Gibson commented, “We are pleased with our results for the second quarter and the first half of fiscal 2024, with total revenue growth of 6% and diluted earnings per share and adjusted diluted earnings per share growth through the first half of the fiscal year of 10%. The macro-economic environment remains stable for small and mid-sized businesses, who continue to face challenges in both the cost of and access to growth capital; and finding quality talent in the current labor market. Our Small Business Employment Watch continues to show moderation in both job growth and wage inflation.”
Paychex delivered the slowest revenue growth of the whole group. The stock is down 6.5% since the results and currently trades at $119.5.
Read our full report on Paychex here, it's free.
Best Q3: Ceridian (NYSE:CDAY)
Founded in 1992 as an outsourced payroll processor and transformed after the 2012 acquisition of Dayforce, Ceridian (NYSE:CDAY) is a provider of cloud based payroll and HR software targeted at mid-sized businesses.
Ceridian reported revenues of $377.5 million, up 19.6% year on year, outperforming analyst expectations by 2.2%. It was a mixed quarter for the company, with strong sales guidance for the next quarter but decelerating customer growth.
Ceridian pulled off the highest full-year guidance raise among its peers. The company added 74,000 customers to reach a total of 6.35 million. The stock is up 2.5% since the results and currently trades at $65.59.
Is now the time to buy Ceridian? Access our full analysis of the earnings results here, it's free.
Weakest Q3: Paycom (NYSE:PAYC)
Founded in 1998 as one of the first online payroll companies, Paycom (NYSE:PAYC) provides software for small and medium-sized businesses (SMBs) to manage their payroll and HR needs in one place.
Paycom reported revenues of $406.3 million, up 21.6% year on year, falling short of analyst expectations by 1.2%. It was a weak quarter for the company, with full-year revenue guidance missing analysts' expectations and underwhelming revenue guidance for the next quarter.
Paycom had the weakest performance against analyst estimates and weakest full-year guidance update in the group. The stock is down 16.9% since the results and currently trades at $203.53.
Read our full analysis of Paycom's results here.
Paycor (NASDAQ:PYCR)
Found in 1990 in Cincinnati, Ohio, Paycor (NASDAQ: PYCR) provides software for small businesses to manage their payroll and HR needs in one place.
Paycor reported revenues of $143.6 million, up 21.4% year on year, surpassing analyst expectations by 2.9%. It was a mixed quarter for the company, with underwhelming revenue guidance for the next quarter and a decline in its gross margin.
The stock is up 13.5% since the results and currently trades at $20.28.
Read our full, actionable report on Paycor here, it's free.
Paylocity (NASDAQ:PCTY)
Founded by payroll software veteran Steve Sarowitz in 1997, Paylocity (NASDAQ:PCTY) is a provider of payroll and HR software for small and medium-sized enterprises.
Paylocity reported revenues of $317.6 million, up 25.4% year on year, in line with analyst expectations. It was a weak quarter for the company, with underwhelming revenue guidance for the next quarter and full-year.
The stock is down 7.9% since the results and currently trades at $158.3.
Read our full, actionable report on Paylocity here, it's free.
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The author has no position in any of the stocks mentioned
