Paychex Posts 3Q Revenue Decline

In 3Q, integrated human capital management solutions provider Paychex reported total revenue of $1.1 billion, reflecting a 3% decline year-over-year.

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Meanwhile, Paychex’s (PAYX) operating income came in flat at $468.6 million. Adjusted diluted earnings per share were down 1% year-over-year to $0.96 a share. Additionally, Paychex ended the quarter with cash, restricted cash, and total corporate investments of $1.1 billion.

However, according to CEO Martin Mucci, Paychex continues to see progress regarding key indicators. “Client retention remains strong and at record levels, and our results for the third quarter show that our resilient business model has helped us navigate the uncertainties created by COVID-19,” Mucci said.

For the fiscal year ending May 31, 2021, Paychex is projecting total revenue growth to be in the range of -2% to flat. Adjusted operating margin is anticipated to be between 36% and 37%, and adjusted diluted EPS is expected to decline 2% or to remain flat. (See Paychex stock analysis on TipRanks)

Following the third-quarter financial results, BMO Capital analyst Jeffrey Silber raised the price target to $96 from $93, implying a 1.26% upside potential to current levels. According to the analyst, “results were better than expected, driven by better than expected margins.”

The consensus rating for Paychex is a Hold based on 3 Buys, 3 Holds, and 2 Sells. The average analyst price target on the stock is $97, implying a 2.3% upside potential to current levels.

Based on TipRanks’ Smart Score rating system, PAYX scores a 9 out of 10, suggesting it is likely to outperform the overall market.