Paychex (PAYX) 2021 Q3 Earnings Preview

Back in the 1970s, there was no notable firm providing payroll accounting services to smaller businesses. Former sales manager at Electronic Accounting Systems, Thomas Golisano saw this gap as a huge opportunity. In 1971, Golisano founded Paymaster that was later renamed Paychex Inc. (NASDAQ:PAYX). The company started offering payroll services to small and medium-size enterprises. Today, it is a leading provider of HR, payroll, and benefit outsourcing services in the U.S.

Paychex recently announced its financial results for the third quarter. It reported earnings of $350.5 million, or 97 cents per share for the three months ended February 28, marginally down from $354.5 million, or 98 cents per share in the comparable period of 2020. Excluding certain items, adjusted earnings of 96 cents per share were above the consensus forecast of 92 cents per share.

Revenue for the quarter came in at $1.11 billion, down 3 percent from the year-ago quarter, but was in line with analysts’ average estimate.  Revenue from management solutions was nearly flat at $846.8 million. Comparatively, PEO and insurance solutions revenue slipped 8 to $249.8 million in the quarter.

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Speaking on the results, CEO Martin Mucci said, “Client retention remains strong and at record levels, and our results for the third quarter show that our resilient business model has helped us navigate the uncertainties created by COVID-19. We continue to see progress in our key indicators and remain committed to providing our clients the flexibility, technology, and resources they need to respond and adapt to the uncertainties of the COVID-19 environment.”

Looking forward, Paychex expects its adjusted profit and revenue in the range of -2 percent to flat for fiscal 2021. Moreover, management solutions revenue is expected to be in the range of flat to +2 percent for the year.

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