Paychex (NASDAQ:PAYX) reported better-than-expected results for the fourth quarter of Fiscal 2024. Despite this beat, PAYX stock declined over 6% yesterday. This drop might be due to the company’s outlook for Fiscal 2025, which indicates slower growth compared to previous years.
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Paychex provides payroll, human resources, and outsourcing services for businesses. It should be noted that the company has a strong earnings surprise history, as it missed expectations in just one quarter since October 2020 (for a thorough assessment of JBL stock, go to TipRanks’ Stock Analysis page).
PAYX: Q4 Snapshot
Paychex reported adjusted earnings of $1.12 per share, which increased 15% year-over-year and surpassed the consensus estimate of $1.10. Furthermore, the company’s revenue grew 5% year-over-year to $1.295 billion and came slightly above the consensus estimate of $1.293 billion.
In terms of segments, the Management Solutions unit’s revenue rose 3% year-over-year, primarily due to the growing market share of its products.
Moreover, sales from the Professional Employer Organization and Insurance Solutions segment climbed by about 9%. Also, Interest on Funds Held for Clients jumped 54% year-over-year due to higher average interest rates and invested balances.
Fiscal 2025 Outlook
For the full Fiscal 2025, PAYX expects the performance of SMBs to remain challenging due to a tight labor market and inflationary pressures. As a result, PAYX adjusted its earnings forecast to be between 5% and 7% growth. This is lower than the growth PAYX experienced in the past two years, which was 15% in Fiscal 2024 and 13% in Fiscal 2023.
Further, the company expects revenue to grow between 4% and 5.5%, compared with 5% for Fiscal 2024 and 9% for Fiscal 2023.
Is PAYX a Good Stock to Buy?
Following the earnings release, two analysts gave the stock a Hold rating, while one assigned a Sell rating.
Overall, Paychex has a Hold consensus rating on TipRanks. This is based on nine Hold and one sell recommendations. The analysts’ average price target on PAYX stock of $120.90 per share implies 2.99% upside potential. Shares of the company have declined 2.6% in the past six months.
