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.
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.
