Paychex (PAYX) Beats Q3 Earnings Estimates, Updates '18 View
Zacks Investment Research | Mar 26, 2018 01:13AM ET
Paychex Inc. (NASDAQ:PAYX) reported solid results for third-quarter fiscal 2018, wherein the top and the bottom lines came ahead of the respective Zacks Consensus Estimate. Moreover, the company registered year-over year improvement on both counts.
The company reported non-GAAP earnings per share of 63 cents, which beat the Zacks Consensus Estimate by a penny and grew 15% year over year. The upside mainly stemmed from higher revenues, partially offset by increased expenses.
Quarter Details
Paychex reported total revenues (including interest on funds held for clients) of $866.5 million, up 9% year over year. Excluding interest on funds held for its clients, total services revenues (Payroll service and Human Resource Services) increased 8% year over year to $848.4 million. The Zacks Consensus Estimate was pegged at $588 million.
Payroll Service segment revenues went up 2% from the year-ago period to $455 million, primarily on the back of higher revenues per check.
Human Resource Services segment revenues rose 17% year over year to $393.4 million, chiefly driven by strong growth in client base and worksite employees, elevated revenues from retirement, as well as online HR administration services.
Interest on funds held for clients increased 37% on a year-over-year basis to $18.1 million, mainly benefiting from higher average interest rates earned.
Paychex’s total expenses flared up 17% from the year-ago quarter to $574 million due to increased compensation, one-time bonus to non-management employees and a one-time expense related to termination of certain license agreements. Total expenses, as a percentage of total revenues, increased 470 basis points (bps) to 66.2%.
The company’s operating income declined 5% year over year to $292.5 million. In addition, Paychex’s operating margin contracted 470 bps to 33.8%, chiefly due to higher total expenses as a percentage of revenues.
Net income came in at $260.4 million, up from $202.5 million reported in the prior-year quarter.
Paychex, Inc. Price, Consensus and EPS Surprise
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