QQQ   436.78 (-0.29%)
AAPL   182.52 (-1.00%)
MSFT   410.34 (-0.32%)
META   484.03 (-0.43%)
GOOGL   143.96 (-0.09%)
AMZN   174.99 (+0.23%)
TSLA   191.97 (-2.76%)
NVDA   788.17 (+0.36%)
NIO   5.40 (-7.69%)
AMD   176.52 (-2.94%)
BABA   75.96 (-0.22%)
T   16.80 (+1.27%)
F   12.15 (+0.25%)
MU   86.00 (+0.10%)
CGC   3.36 (-0.30%)
GE   153.33 (+1.09%)
DIS   107.74 (+0.09%)
AMC   4.43 (+0.23%)
PFE   27.76 (+0.76%)
PYPL   59.16 (+1.39%)
XOM   103.84 (-0.88%)
QQQ   436.78 (-0.29%)
AAPL   182.52 (-1.00%)
MSFT   410.34 (-0.32%)
META   484.03 (-0.43%)
GOOGL   143.96 (-0.09%)
AMZN   174.99 (+0.23%)
TSLA   191.97 (-2.76%)
NVDA   788.17 (+0.36%)
NIO   5.40 (-7.69%)
AMD   176.52 (-2.94%)
BABA   75.96 (-0.22%)
T   16.80 (+1.27%)
F   12.15 (+0.25%)
MU   86.00 (+0.10%)
CGC   3.36 (-0.30%)
GE   153.33 (+1.09%)
DIS   107.74 (+0.09%)
AMC   4.43 (+0.23%)
PFE   27.76 (+0.76%)
PYPL   59.16 (+1.39%)
XOM   103.84 (-0.88%)
QQQ   436.78 (-0.29%)
AAPL   182.52 (-1.00%)
MSFT   410.34 (-0.32%)
META   484.03 (-0.43%)
GOOGL   143.96 (-0.09%)
AMZN   174.99 (+0.23%)
TSLA   191.97 (-2.76%)
NVDA   788.17 (+0.36%)
NIO   5.40 (-7.69%)
AMD   176.52 (-2.94%)
BABA   75.96 (-0.22%)
T   16.80 (+1.27%)
F   12.15 (+0.25%)
MU   86.00 (+0.10%)
CGC   3.36 (-0.30%)
GE   153.33 (+1.09%)
DIS   107.74 (+0.09%)
AMC   4.43 (+0.23%)
PFE   27.76 (+0.76%)
PYPL   59.16 (+1.39%)
XOM   103.84 (-0.88%)
QQQ   436.78 (-0.29%)
AAPL   182.52 (-1.00%)
MSFT   410.34 (-0.32%)
META   484.03 (-0.43%)
GOOGL   143.96 (-0.09%)
AMZN   174.99 (+0.23%)
TSLA   191.97 (-2.76%)
NVDA   788.17 (+0.36%)
NIO   5.40 (-7.69%)
AMD   176.52 (-2.94%)
BABA   75.96 (-0.22%)
T   16.80 (+1.27%)
F   12.15 (+0.25%)
MU   86.00 (+0.10%)
CGC   3.36 (-0.30%)
GE   153.33 (+1.09%)
DIS   107.74 (+0.09%)
AMC   4.43 (+0.23%)
PFE   27.76 (+0.76%)
PYPL   59.16 (+1.39%)
XOM   103.84 (-0.88%)

Let Paychex Stock Work Hard For You 

Let Paychex Stock Work Hard For You 

Key Points

  • The latest revenue numbers are optimistic for a variety of reasons.
  • Analysts are holding onto the stock, despite some evidence, and see it going higher.
  • There's a lot less chance of a significant correction than there was going into the report.
  • 5 stocks we like better than Paychex

Labor market stocks like Paychex (NASDAQ: PAYX), Automatic Data Processing (NASDAQ: ADP), and even Cintas (NASDAQ: CTAS) have been sustaining growth and outperforming expectations in the face of sketchy economic conditions, and that trend is not ending. The latest reports from Cintas and Paychex show that the employment situation is not only strong but also strengthening. Both companies beat on the top and bottom line and increased their dividends, but one stands out as a winner for investors. Most labor-related stocks are trading at high multiples right now, about double the broad market average, because of their underlying strength and outlook for dividend payments. 

Paychex is no exception, trading at 28X its earnings, but it is a value compared to Cintas if not ADP, which trade at 32X and 28X respectively, and it is a better yield at 2.7%. Both ADP and Cintas pay respectable dividends with yields of 1.8% and 1.15%, and they come with a healthy outlook for dividend growth, but Paychex shines with a better yield and equally healthy outlook for dividend growth. 

Paychex Has Strong Quarter, Margins Improve 

Paychex had a great quarter posting revenue of $1.21 billion or up 12% versus last year. The revenue gains are driven by a combination of increased client count and increased head-count per client that drove revenue 340 basis points above the Marketbeat.com consensus estimate as well. On a segment basis, both the Management Solutions and PEO segments saw growth, with Management Solutions up 12% versus a smaller 8% gain in PEO, and there was also margin improvement. 

Moving down to the earnings data, the company reported a 12% increase in operating income that has an operating margin of 41.1%, compared to only 40.9% last year. The improvement is slim indeed, but it helped to amplify the topline strength and drive adjusted EPS to $1.03 or up 16% versus last year and $0.06 better than expected. The takeaway is the dividend payment is as safe as ever and is coupled with an improved outlook for earnings this fiscal year. 


The company restated guidance for the year, maintaining its revenue outlook and improving the outlook for earrings. The company is expecting revenue growth in the range of 7% to 8% versus the consensus of 7.72% and for earnings in the range of up 11% to 12%. This compares to the prior guidance for earnings to be up 9% to 10% and the consensus target of up 9.46%, and there is a chance for upside surprises given the latest employment data. The NFP shows month-to-month employment gains are running in the range of 300K, which is strong relative to pre-COVID levels, and the JOLTs indicate job openings are trending near record highs and above 11 million. 

The Analysts Hold Onto Paychex 

The analyst's activity is a little mixed for Paychex, but the takeaway is they are holding the stock and see it moving higher. The consensus of 12 analysts is a firm Hold leaning toward Buy with a price target about 11% above the recent price action. The consensus sentiment has been holding steady, and that did not change following the earnings release, but the price target is trending higher. The consensus price target is trending higher in the 12, 3, and 1-month comparisons, and it could move even higher over the next quarter or two. 

The Technical Outlook: Paychex Trades At Bottom Of Range 

The price action in Paychex has been range bound at recent highs, and that situation has not changed. The post-release price action did confirm support at the bottom of the range, however, so there is less chance of a significant correction than there was going into the report. Assuming the market continues to support the stock at this level, it should continue to move within the range until more news comes out. If not, this stock could fall below support and move down to the $100 to $90 range, where it would be a better value and yield. 

Let Paychex Stock Work Hard For You 

→ Gold is SOARING – here's what you need to do (From Stansberry Research) (Ad)

Should you invest $1,000 in Paychex right now?

Before you consider Paychex, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Paychex wasn't on the list.

While Paychex currently has a "Reduce" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

13 Stocks Institutional Investors Won't Stop Buying Cover

Which stocks are major institutional investors including hedge funds and endowments buying in today's market? Click the link below and we'll send you MarketBeat's list of thirteen stocks that institutional investors are buying up as quickly as they can.

Get This Free Report

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Cintas (CTAS)
4.7813 of 5 stars
$633.10+1.0%0.85%45.94Moderate Buy$560.57
Automatic Data Processing (ADP)
4.4516 of 5 stars
$255.87+0.4%2.19%29.79Hold$253.17
Paychex (PAYX)
4.6422 of 5 stars
$124.64-0.1%2.86%27.70Reduce$123.17
Compare These Stocks  Add These Stocks to My Watchlist 

Thomas Hughes

About Thomas Hughes

  • tmhughes.writeon@gmail.com

Contributing Author

Technical and Fundamental Analysis

Experience

Thomas Hughes has been a contributing writer for MarketBeat since 2019.

Areas of Expertise

Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies

Education

Associate of Arts in Culinary Technology

Past Experience

Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights. 


Featured Articles and Offers

Search Headlines: