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Paycom (PAYC) to Report Q3 Earnings: What's in the Offing?

PaycomPAYC is set to report third-quarter 2018 results on Oct 30.

The company beat the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average positive surprise of 26.17%.

In the last reported quarter, the company's non-GAAP earnings per share came in at 59 cents, which beat the Zacks Consensus Estimate of 49 cents and increased from the adjusted figure of 26 cents in the year-ago quarter.

Moreover, revenues of $128.8 million increased 31% from the year-ago quarter and surpassed the Zacks Consensus Estimate of $124 million.

For third-quarter 2018, Paycom Software expects revenues in the range of $129-$131 million. The Zacks Consensus Estimate is pegged at $130.5 million, indicating a 28.8% increase from the year-ago quarter.

The Zacks Consensus Estimate for earnings stands at 52 cents per share, indicating an increase of 79.3% on a year-over-year basis.

Let's see how things are shaping up for the upcoming announcement.

Factors at Play

Paycom Software continues to gain from increasing demand for advanced human capital management (HCM) solutions. New business wins and product development initiatives are tailwinds for the company.

As part of its monthly updates, the company introduces various enhancements to its overall product offering that is rolled out to its client base. Moreover, Paycom's mobile app, which includes all the functionalities offered by an employee self-service desktop application, positions it well for continued growth.

Paycom's single database HCM solution is gaining clients on a regular basis. The company's go-to-market strategy is also likely to help it expand its presence in the United States.

We note that in the last reported quarter, Paycom revenues benefited from solid growth in recurring revenues, which comprised around 98% of total revenues. Additionally, increase in sales productivity also makes us optimistic.

The Zacks Consensus Estimate for recurring revenues is pegged at $129 million, which indicates a year-over-year jump of 29%.

However, increasing competition from companies like Paylocity Holding Corporation, Intuit and Paychex remains a headwind, which could lead to pricing pressure and affect Paycom's margins. Moreover, the timing of new hires is also anticipated to remain an overhang on gross margins.

Paycom Software, Inc. Price and EPS Surprise

Paycom Software, Inc. Price and EPS Surprise | Paycom Software, Inc. Quote

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP . Zacks Rank #4 (Sell) or #5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Paycom currently carries a Zacks Rank #3 and has an Earnings ESP of +0.65%, which increases the odds of an earnings beat.

Stocks That Warrant a Look

Here are a few more stocks worth considering as our model shows that these also have the right combination of elements to deliver earnings beat in their upcoming releases.

Vishay Intertechnology VSH has an Earnings ESP of +0.62% and Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.

Advanced Energy Industries AEIS has an Earnings ESP of +2.70% and a Zacks Rank #2.

AMETEK AME has an Earnings ESP of +0.71% and a Zacks Rank #2.

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Paycom Software, Inc. (PAYC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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