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Paychex (PAYX) Q4 Earnings & Revenues Beat Estimates, Up Y/Y

Paychex, Inc.PAYX reported better-than-expected fourth-quarter fiscal 2021 results.

Adjusted earnings of 72 cents per share beat the Zacks Consensus Estimate by 7.5% and increased 18% on a year-over-year basis. Total revenues of $1.03 billion beat the consensus mark by 5% and increased 12.5% year over year.

Revenues in Detail                  

Revenues from Management Solutions increased 14% year over year to $756.4 million. The segment benefited from growth in the company’s client base and increased penetration of its suite of solutions, especially HR outsourcing, time and attendance, and retirement services and higher check volumes. Solid growth was witnessed in new services and product initiative offerings.

Professional employer organization (“PEO”) and Insurance Solutions revenues were $258.3 million, up 13% from the year-ago quarter. The uptick was due to an increase in the number of clients’ worksite employees and higher margins on state unemployment insurance.

Interest on funds held for clients decreased 43% year over year to $14.5 million on lower average interest rates and realized gains, partially offset by increase in average investment balances.

Operating Performance

Adjusted operating income increased 18% year over year to $353.8 million. Adjusted operating margin rose to 34.4% from 32.7% in the year-ago quarter.

Adjusted EBITDA of $401.4 million increased 14% year over year.

Paychex, Inc. Price, Consensus and EPS Surprise

Paychex, Inc. price-consensus-eps-surprise-chart | Paychex, Inc. Quote

Balance Sheet & Cash Flow

Paychex exited fourth-quarter fiscal 2021 with cash and cash equivalents of $995.2 million compared with $787 million at the end of the prior quarter. Long-term debt was $797.3 million compared with $797.2 million in the prior quarter. Cash provided by operating activities was $389.7 million in the reported quarter.

During the reported quarter, the company paid out $238.2 million in dividends and repurchased shares worth $79.7 million.

Fiscal 2022 View

For fiscal 2022, total revenues are expected to register almost 7% growth. Adjusted earnings per share are expected to register 10-12% growth.

Management Solutions revenues are expected to grow nearly 7%. PEO and Insurance Solutions revenues are anticipated to register 8-10% growth. Interest on funds held for clients is expected to be flat.

Adjusted operating margin is expected to be almost 38%. Adjusted EBITDA margin is expected to be nearly 42%.

Currently, Paychex carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Business Services Companies

Equifax’s EFX first-quarter 2021 adjusted earnings of $1.97 per share beat the Zacks Consensus Estimate by 29.6% and improved on a year-over-year basis. Revenues of $1.21 billion outpaced the consensus estimate by 7.9% and improved 26.6% year over year on a reported basis as well as on a local-currency basis.

Robert Half’s RHI first-quarter 2021 earnings of 98 cents per share beat the consensus mark by 22.5% and were up 24.1% year over year. Revenues of $1.4 billion surpassed the consensus mark by 3.3% but declined 7.2% year over year on a reported basis and 7.6% on an adjusted basis.

Omnicom’s OMC first-quarter 2021 adjusted earnings of $1.33 per share beat the consensus mark by 16.7% and increased 11.8% year over year. Total revenues of $3.4 billion surpassed the consensus estimate by 3.6% and marginally increased year over year.

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Paychex, Inc. (PAYX): Free Stock Analysis Report
 
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Robert Half International Inc. (RHI): Free Stock Analysis Report
 
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