Paychex’s softer revenue outlook sparks share price caution - analyst
Published: 10:27 03 Apr 2024 EDT
Jefferies has slapped a hold rating on Paychex Inc (NASDAQ:PAYX) stock after the human resources group reported a third-quarter revenue shortfall and downbeat forecast.
Paychex’s revenues fell short of expectations mainly due to lower Employee Retention Tax Credit (ERTC) claims, softer hiring trends, and greater discounting than anticipated.
Jefferies highlighted these factors as the primary drivers behind the revenue miss and the subsequent reduction in fourth-quarter revenue growth guidance to 5%.
This adjustment stems from anticipated reductions across both Management Solutions (MS) and Professional Employer Organization (PEO) services.
Jefferies did note that Paychex exhibited a profitability bright spot, with operating margins surpassing expectations. The company achieved a 45.1% operating margin, benefiting from controlled costs.
Despite the revenue miss, Paychex’s shares held steady at $119.9 in opening Wednesday trades. Jefferies has a 12-month price target of $120 for the stock.
