Paychex Earnings Show Profit and Maintain Growth Path

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Paychex Inc. (NASDAQ: PAYX) reported first-quarter fiscal 2015 results before markets opened Wednesday. The payroll and benefits outsourcing provider reported quarterly diluted earnings per share (EPS) of $0.47 on total revenues of $666.8 million. In the same period a year ago, Paychex reported EPS of $0.44 on revenue of $613.1 million. First-quarter results also compare to the consensus estimates for EPS of $0.46 and $662.62 million in revenue.

Service revenue totaled $656.6 million, up 9% compared with $603.1 million in the year-ago quarter. Interest revenue on funds held for clients was up slightly from $10.0 million a year ago to $10.2 million this year.

Total expenses rose 12%, with operating expenses rising 14% on higher performance-based compensation costs, added headcount and new product development, among other items.

Operating income rose 5% from $255.1 million to $267.5 million and net income also rose 5% from $162.8 million to $171.3 million.

The company reiterated the 2015 fiscal year guidance it provided at the end of its fourth quarter in June. Total service revenue is forecast to rise between 8% and 10%, while net income is expected to rise in a range of 6% to 8%. The consensus estimates call for EPS to increase from $1.71 in fiscal 2014 to $1.84, a jump of 7.6%. Total revenues are forecast to rise from $2.52 billion to $2.72 billion, up 7.9%.

The company’s CEO said:

Payroll service revenue continues to advance, growing 4.5%, and we continue to see strong demand for our comprehensive suite of human resource outsourcing services. Solid sales execution continued with good progress during the first quarter in both new sales units and revenue.

The company’s payroll services revenue rose 4% year-over-year and its human resources service revenue rose 17%. Paychex noted that revenue increased on a new minimum premium health care plan that it started offering customers in the second half of its last fiscal year.

Paychex also repurchased 900,000 shares of its common stock during the first quarter, spending $37.5 million of a $350 million authorization.

Shares were up about 2% in morning trading Wednesday, at $43.29 in a 52-week range of $39.21 to $45.95. Thomson Reuters had a consensus analyst price target of around $42.00 before the results were announced.

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