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Paycom Software (PAYC) Q4 Earnings: What's in the Cards?

A provider of human capital management software as a service, Paycom Software, Inc.PAYC is set to report fourth-quarter 2015 results on Feb 9. Last quarter, the company posted in-line earnings. Let us see how things are shaping up for this announcement.

Factors to Consider

Paycom Software reported modest third-quarter fiscal 2015 results, with its top line surpassing the Zacks Consensus Estimate and the bottom line matching the same. Also, year-over-year comparisons on both counts were favorable. The results were driven by a shift toward cloud-based offerings and new client additions.

Revenue growth seems to be steady and was positively impacted by higher recurring revenues and higher traction in cloud-based offerings. Better-than-expected demand for advanced human capital management and payroll software solutions during the reported quarter were the other positives.

We believe that higher traction of Paycom Software's Affordable Care Act ("ACA") dashboard application that tracks employee count, employee status and health care plan affordability will act as a tailwind for the company in the long run. Also, Paycom Software might witness long-term growth by successfully cross-selling newer products to the existing client base, which will boost revenues, going forward.

Nevertheless, competition from companies like Paylocity Holding Corporation PCTY , Intuit Inc. and Paychex, Inc. remains a headwind.

Earnings Whispers

Our proven model does not conclusively show that Paycom Software will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 8 cents. Hence, the difference is 0.00%.

Zacks Rank: Paycom Software's Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies, which you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

AMN Healthcare Services, Inc. AHS has an Earnings ESP of +2.44% and a Zacks Rank #1 (Strong Buy)

Agilent Technologies Inc. A has an Earnings ESP of +2.33% and a Zacks Rank #3

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

PAYCOM SOFTWARE (PAYC): Free Stock Analysis Report

AGILENT TECH (A): Free Stock Analysis Report

AMN HLTHCR SVCS (AHS): Free Stock Analysis Report

PAYLOCITY HLDG (PCTY): 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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