Jim Cramer expects Paychex, Inc. (NASDAQ:PAYX) to enter its upcoming earnings report with strong momentum, as he said during the game plan of the September 18 episode of Mad Money:
Wednesday, besides the Okta meeting, we have reports from two companies that are very important to small and medium-sized businesses. Cintas: they do uniforms, and Paychex… Paychex handles payroll processing and human resources. Both are coming in earnings with a full head of steam. Makes sense. That segment of the economy remains the hottest and historically won’t be hurt by that first rate hike.
Paychex Enters Earnings With Small-Business Momentum
Paychex, Inc. is scheduled to report fiscal first-quarter 2027 results on September 23 after fiscal 2026 revenue rose 17% to $6.51 billion and adjusted diluted EPS increased 11% to $5.51. Its latest labor-market data showed the Small Business Jobs Index at 99.13 in August, roughly in line with the 2026 year-to-date average, while weekly hours worked increased for a sixth consecutive month. Hourly earnings rose 2.89%, and weekly earnings increased 3%. The index draws on payroll data from approximately 350,000 Paychex clients with fewer than 50 employees.
Paycor contributed approximately 12 percentage points to total revenue growth and 15 percentage points to Management Solutions revenue growth for fiscal 2026. For fiscal 2027, the company expects Management Solutions revenue to increase 5% to 6%.
Bear Case is Slower EPS Growth and Lower Interest Income
Revenue growth is expected to slow from 17% in fiscal 2026 to 5% to 6% in fiscal 2027. However, Paycor contributed approximately 12 percentage points to fiscal 2026 growth, making the underlying revenue comparison much closer. Meanwhile, adjusted EPS growth is projected at 7% to 9%, below the 11% increase delivered in fiscal 2026. Paychex, Inc. also expects interest earned on funds held for clients to fall to $195 million to $205 million in fiscal 2027 from $210.9 million in fiscal 2026. Fiscal 2026 interest expense increased to $269.5 million from $105.4 million, with the company attributing the increase primarily to debt used to finance the Paycor acquisition.
Hedge Fund Positioning and Short Interest
As per Insider Monkey data, which tracks more than 1,000 hedge funds, 40 hedge funds held Paychex, Inc. in the second quarter, down from 43 in the prior quarter. Of those funds, Millennium Management became the biggest shareholder after increasing its position by 106% to approximately 2.33 million shares. As of August 31, approximately 5.8% to 6.4% of Paychex’s float was sold short. The September 23 results should provide an updated view of Management Solutions growth, the contribution from Paycor, and whether the company maintains its 5% to 6% revenue-growth and 7% to 9% adjusted EPS-growth targets.
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