), specializing in payment processing services, is scheduled to
announce its first quarter fiscal 2013 results on September 24
after the closing bell, and we notice limited movement in estimates
at this point.
Fourth Quarter Overview
Paychex delivered modest fourth quarter 2012 results, with
earnings of 34 cents per share, in line with the Zacks Consensus
Estimate. The 3.6% increase from the year-ago quarter was on
account of revenue improvement across all its segments, partially
offset by low new business generation.
Revenues grew 5.5% year over year, backed by increases of 11.5%
in Human Resource Service revenue and 3.5% in Payroll Service
Despite higher operating expenses, operating margin increased 70
basis points year over year owing to favorable mix.
Paychex appeared to be a bit cautious as far as its fiscal 2013
guidance is concerned. Keeping in view the current market and
economic condition, Paychex believes that checks per client will
moderate through fiscal 2013. But this will be partially offset by
modest client growth and improved revenue per check. Also, Human
Resources organic revenue growth will follow the historical
Agreement of Analysts
Out of the 17 and 23 analysts providing estimates for the first
quarter and fiscal 2013, respectively, we noticed absolutely no
revision in the past 30 days. No estimate revisions were either
noticed for fiscal 2014. The limited movement since Paychex
reported fourth quarter results suggests that there is a lack of
But some analysts prefer to remain cautious based on
management's commentary regarding the sluggishness of new
small-business formation. Moreover, a few analysts think that
aggressive pricing from
Automated Data Processing Inc.
) is stealing customers away from Paychex.
The time difference between when the company receives payments
from its clients and pays it out to employees typically earns some
interest for Paychex. Now, with the government contemplating lower
interest rates, this quick income stream of the company will also
However, some analysts are positive about Paychex's efforts to
be technologically advanced by launching mobile apps for Apple
Inc.'s (AAPL) iPad and Android tablets, which allows its users to
use the apps whether they are using a personal computer or laptop.
In addition, Paychex launched smartphone applications targeting
both employers and employees who are always on the move.
Magnitude of Estimate Revisions
There was no change in the Zacks Consensus Estimate for the
first quarter and fiscal 2013 in the past 30 days. But the
estimates moved down by 2 cents each to 41 cents and $1.61 for the
first quarter and fiscal 2013, respectively in the past 90 days.
The estimate for fiscal 2014 plunged 5 cents to $1.71 in the past
We are encouraged by management's commentary regarding continued
investments in product development and focus toward building sales
force to support revenue growth.
But lingering unemployment situation, strict interest rates and
stiff competition from Automated Data Processing and
), keep us concerned. However, Paychex' zero European exposure will
be beneficial for the company.
Paychex has a Zacks # 3 Rank, implying a short-term Hold
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