Paychex Earnings, Sales Up on Strong HR Business

Paychex Inc. (NASDAQ: PAYX) reported first-quarter fiscal 2016 results before markets opened Wednesday. The payroll and benefits outsourcing provider reported quarterly adjusted diluted earnings per share (EPS) of $0.52 on total revenues of $723 million. In the same period a year ago, Paychex reported EPS of $0.47 on revenue of $666.8 million. First-quarter results also compare to the consensus estimates for EPS of $0.51 and $717.55 million in revenue.

On a GAAP basis, first-quarter EPS totaled $0.58, including a tax benefit of approximately $0.06 per share.

Payroll service revenue totaled $432.5 million, up 5% compared with $412.8 million in the year ago quarter. Interest revenue on funds held for clients was up from $10.2 million a year ago to $10.8 million this year. Human resources services revenue rose 15% year over year to $279.7 million from $243.8 million.

Total expenses rose 7%, with operating expenses rising 6% on higher performance-based compensation costs and higher wages.

Operating income rose 11% from $267.5 million to $296.1 million, and net income also rose 22% from $171.3 million to $209.1 million. Net income includes the tax benefit.

In its fiscal year 2016 outlook, Paychex said it expects total service revenue to rise between 7% and 8% while net income is expected to rise in a range of 8% to 9%. The consensus estimates call for EPS to increase from $1.85 in fiscal 2015 to $2.01, a jump of 8.6%. Total revenues are forecast to rise from $2.74 billion to $2.94 billion, up 7.3%. For the second fiscal quarter ending in November, analysts are looking for EPS of $0.51 on revenues of $723.49 million.

The company’s CEO said:

Fiscal 2016 is off to a good start, and we have continued to experience positive results across our major product lines. Payroll service revenue growth was 5%, as expected. We continue to see strong demand for our human resource services, including double-digit growth in the number of client worksite employees served.

Paychex repurchased 1.3 million shares of its common stock during the first quarter, spending $62.9 million of a $350 million authorization that expires in 2017. In July the company boosted its quarterly dividend by 11%, from $0.38 to $0.42 per share.

Shares were up about 2% early Tuesday, at $46.95 in a 52-week range of $41.59 to $51.72. Thomson Reuters had a consensus analyst price target of around $46.75 before the results were announced.

ALSO READ: 5 High-Dividend Blue Chip Stocks on Sale After Market Sell-Off

Sponsored: Tips for Investing

A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.