Paychex, Inc. PAYX announced better than expected results for the first quarter of fiscal 2022.
Adjusted earnings (excluding 2 cents of one-time items) of $1.03 per share beat Zacks’ consensus estimate of 6.2% and increased 15.7% year-over-year . Total revenue of $1.2 billion topped the consensus mark of 1.8% and was up 11.4% year over year.
Over the past year, Paychex shares have gained 5.1% against growth of 3.8% in the industry to which it belongs.
Image source: Zacks Investment Research
Income in detail
Management Solutions revenue increased 12% year-over-year to $905.5 million. The segment benefited from growth in the number of customer employees served for human capital management (HCM) and additional field employees for HR solutions; improved revenue per customer on price realization and greater product penetration, including strong demand for HR, retirement and time and attendance solutions; as well as the expansion of HCM ancillary services.
Professional Employer Organizations (“POE”) and Insurance Solutions revenue was $282.8 million, up 8% from the prior year quarter level. This increase is explained by the growth in the average number of construction workers and by the increase in income from PEO health insurance.
Interest on funds held for clients increased 24% year over year to $17.9 million.
Operating profit rose 12% year over year to $495.6 million. EBITDA of $539.7 million increased 8% year over year.
Paychex, Inc. Price, Consensus, and EPS Surprise
Paychex, Inc. price-consensus-eps-surprise-chart | Quote Paychex, Inc.
Balance sheet and cash flow
Paychex ended the first quarter of fiscal 2022 with cash and cash equivalents of $1.18 billion, compared to $370 million at the end of the previous quarter. Long-term debt was $797.8 million, compared to $797.7 million in the prior quarter.
Cash flow from operating activities was $364.3 million in the current quarter. During the quarter under review, PAYX paid out $284.6 million in dividends.
View of the 2023 financial year
Paychex lowered its adjusted earnings per share seen. Adjusted EPS is now expected to grow 11-12% versus the previous expectation of 9-10% growth.
PAYX continues to expect total revenue to grow 7-8%.
Management solutions revenue is expected to grow 5-7%. PEO and insurance solutions revenue is expected to grow 8-10%.
The adjusted operating margin should grow by 40 to 41%. The adjusted EBITDA margin should reach nearly 44%.
Currently, Paychex carries a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of other business services companies
Equifax EFX released mixed results in the second quarter of 2022, in which earnings beat estimates, but revenue missed the same.
EFX’s adjusted earnings of $2.09 per share beat Zacks’ consensus estimate by 3% and improved 5.6% year-over-year. Revenue of $1.32 billion slightly beat the consensus estimate, but improved 6.6% year over year.
IQVIA Holdings IQV posted strong results in the second quarter of 2022, in which earnings and revenue exceeded the Zacks consensus estimate.
IQV’s adjusted earnings per share of $2.44 topped the consensus mark of 2.1% and improved 15% year-over-year. Total revenue of $3.54 billion beat the consensus estimate of 1.2% and was up 3% year over year.
Omnicom Group MOC posted impressive results in the second quarter of 2022, in which earnings and revenue exceeded the Zacks consensus estimate.
OMC’s earnings of $1.68 per share beat the consensus mark of 7.7% and rose 15.1% year-over-year, driven by strong margin performance. Total revenue of $3.6 billion beat the consensus estimate of 4.4%, but was down slightly year over year.
From thousands of stocks, 5 Zacks experts have each picked their favorite to skyrocket by +100% or more in the coming months. Of these 5, Research Director Sheraz Mian selects one to have the most explosive advantage of all.
It’s a little-known chemical company that’s up 65% year-on-year, but still very cheap. With relentless demand, rising earnings estimates for 2022 and $1.5 billion for stock buybacks, retail investors could step in at any time.
This company could rival or surpass other recent Zacks stocks that are expected to double, such as Boston Beer Company which jumped +143.0% in just over 9 months and NVIDIA which exploded +175.9% in one. year. At the top
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
Paychex, Inc. (PAYX): Free Inventory Analysis Report
Omnicom Group Inc. (OMC): Free Stock Analysis Report
Equifax, Inc. (EFX): Free Stock Analysis Report
IQVIA Holdings Inc. (IQV): Free Stock Analysis Report
To read this article on Zacks.com, click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.