Paychex Reports Strong Q4 Results; Shares Rise 1.3%

Shares of Paychex (PAYX), a human capital management solutions provider, closed 1.3% higher after the company reported robust financial results for its fourth quarter that ended May 31. The company offers insurance, retirement, payroll, and human resource (HR) services.

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Adjusted earnings per share (EPS) grew 18% year-over-year to $0.72 per share, beating the Street’s estimates of $0.67. (See Paychex stock chart on TipRanks)

Total revenue rose 12% year-over-year to $1.03 billion, surpassing analysts’ expectations of $980.48 million. Management Solutions revenue went up 14% to $ 756.4 million, and Professional Employer Organization (PEO) and Insurance Solutions revenue rose 13% to $258.3 million.

President and CEO of Paychex Martin Mucci said, “Our fourth quarter results were driven by record client retention levels, record sales results, and stronger checks per client, which were driven by improving macroeconomic conditions and gains in employment.”

For the fiscal year ending May 31, 2022, the company expects total revenue to grow by 7% and adjusted EPS to rise by 10% to 12%. The company also anticipates revenue from Management Solutions to go up by nearly 7%, and PEO and Insurance Solutions revenue to increase in the range of 8% to 10%.

Jefferies analyst Samad Samana recently maintained a Hold rating on the stock and increased the price target from $95 to $115 (9% upside potential).

Samana views Paychex’s strong client base growth and “encouraging” macro commentary as a boost for his coverage of the HR/payroll sector.

Overall, the stock has a Hold consensus rating based on 3 Buys, 6 Holds, and 2 Sells. The average Paychex analyst price target of $101.36 implies 4% downside potential from current levels. The company’s shares have gained 17% over the past year.