Spotting Winners: Paychex (NASDAQ:PAYX) And HR Software Stocks In Q3
Quarterly earnings results are a good time to check in on a company’s progress, especially compared to other peers in the same sector. Today we are looking at Paychex (NASDAQ:PAYX), and the best and worst performers in the HR software group.
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 0.9% while next quarter's revenue guidance was 1.5% below consensus. Valuation multiples for growth stocks have reverted to their historical means after reaching highs in early 2021, and while some of the HR software stocks have fared somewhat better than others, they have not been spared, with share prices declining 6.6% 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 compare to the previous quarter.
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 weakest performance against analyst estimates of the whole group. The stock is down 6.4% since the results and currently trades at $119.67.
Read our full report on Paychex here, it's free.
Best Q3: 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 $159.5 million, up 20.1% year on year, outperforming analyst expectations by 2.4%. It was a mixed quarter for the company, with a decent beat of analysts' revenue estimates but underwhelming revenue guidance for the next quarter.
Paycor scored the fastest revenue growth among its peers. The stock is down 2.2% since the results and currently trades at $19.16.
Is now the time to buy Paycor? Access our full analysis of the earnings results here, it's free.
Weakest Q3: 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 $326.4 million, up 19.5% year on year, in line with analyst expectations. It was a weak quarter for the company, with full-year revenue guidance missing analysts' expectations.
Paylocity had the weakest full-year guidance update in the group. The stock is down 0.7% since the results and currently trades at $171.06.
Read our full analysis of Paylocity's results here.
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 $434.6 million, up 17.3% 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 full year.
Paycom scored the biggest analyst estimates beat among its peers. The stock is down 4.4% since the results and currently trades at $190.19.
Read our full, actionable report on Paycom here, it's free.
Asure (NASDAQ:ASUR)
Created from the merger of two small workforce management companies in 2007, Asure (NASDAQ:ASUR) provides cloud based payroll and HR software for small and medium-sized businesses (SMBs).
Asure reported revenues of $26.26 million, down 10.3% year on year, falling short of analyst expectations by 0.2%. It was a slower quarter for the company, with revenue and EPS missing Wall Street's estimate. Looking ahead, its revenue outlook for next quarter was soft, suggesting slower demand to start the year.
Asure pulled off the highest full-year guidance raise but had the slowest revenue growth among its peers. The stock is down 19.6% since the results and currently trades at $8.23.
Read our full, actionable report on Asure here, it's free.
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