Is a Beat Likely for Paycom Software (PAYC) in Q2 Earnings?
Paycom Software PAYC is likely to beat expectations when it reports second-quarter 2023 results on Aug 1.
The company projects revenues between $397 million and $399 million for the second quarter. The Zacks Consensus Estimate for revenues is pegged at $398.2 million, indicating an increase of 25.7% year over year. The consensus mark for earnings is pegged at $1.60 per share, suggesting a 27% rise from the prior-year quarter.
Paycom estimates adjusted EBITDA in the range of $152-$154 million in the quarter to be reported.
The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 11.6%.
Let’s see how things have shaped up for the upcoming announcement.
Paycom Software, Inc. Price and EPS Surprise 
Paycom Software, Inc. price-eps-surprise | Paycom Software, Inc. Quote
Factors to Note
Paycom’s second-quarter performance is likely to have benefited from the strong demand for the latest products, new business wins and the high-margin recurring revenue business. Our estimates for the company’s Recurring revenues are pegged at $391.7 million, suggesting year-over-year growth of 25.7%.
Paycom’s employee usage strategy, sales efforts and investments might have contributed to sales growth in the quarter to be reported. Moreover, the cloud-based human capital management solution provider earlier announced its intention to aggressively drive advertising and marketing efforts to generate more demo leads, virtual meetings and increased close rates of deals. These are likely to have led to market share gains for Paycom.
The company expects the strong adoption of the BETI solution, the industry-first technology that empowers employees to do their payroll among clients, aiding them to avoid time-consuming manual checks. We anticipate new client additions to have driven the top line in the second quarter.
However, Paycom’s quarterly performance is expected to have been affected by macroeconomic uncertainty-triggered economic and business disruptions, which might have hurt the headcount across its client base. Enterprises are postponing their large IT spending plans due to the weakening global economy amid ongoing macroeconomic and geopolitical issues.
Earnings Whispers
Our proven model predicts an earnings beat for Paycom this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($1.63 per share) and the Zacks Consensus Estimate ($1.60 per share), is +1.88%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: PAYC carries a Zacks Rank #2.
Other Stocks With the Favorable Combination
Per our model, NVIDIA NVDA, Apple AAPL and Alibaba BABA also have the right combination of elements to post an earnings beat in their upcoming releases.
NVIDIA is slated to report second-quarter fiscal 2024 results on Aug 23. The company sports a Zacks Rank #1 and an Earnings ESP of +5.56% at present. NVDA’s earnings beat the Zacks Consensus Estimate twice in the trailing four quarters while missing the same on two occasions, the average surprise being 0.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for second-quarter earnings is pegged at $2.06 per share, suggesting a whopping increase of 303.9% from the year-ago quarter’s earnings of 51 cents. NVIDIA’s quarterly revenues are estimated to increase 64.4% year over year to $11.02 billion.
Apple carries a Zacks Rank #3 and has an Earnings ESP of +3.60%. The company is scheduled to report third-quarter fiscal 2023 results on Aug 3. Its earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing the same on one occasion, with the average surprise being 2.7%.
The Zacks Consensus Estimate for Apple’s third-quarter earnings stands at $1.20 per share, flat with the year-ago quarter. It is estimated to report revenues of $81.21 billion, which suggests a decrease of approximately 2.1% from the year-ago quarter.
Alibaba carries a Zacks Rank #3 and has an Earnings ESP of +6.19%. The company is anticipated to report first-quarter fiscal 2024 results on Aug 3. Its earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 16.9%.
The Zacks Consensus Estimate for BABA’s first-quarter earnings is pegged at $1.90 per share, indicating a year-over-year increase of 8.6%. The consensus mark for revenues stands at $31.01 billion, suggesting a year-over-year rise of 1%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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