The 10-second takeaway
For the quarter ended Feb. 29 (Q3), Paychex met expectations on revenues and met expectations on earnings per share.
Compared to the prior-year quarter, revenue increased and GAAP earnings per share improved.
Gross margins grew, operating margins dropped, net margins dropped.
Paychex logged revenue of $569.5 million. The 19 analysts polled by S&P Capital IQ predicted revenue of $569.1 million on the same basis. GAAP reported sales were 7.2% higher than the prior-year quarter's $531.3 million.
Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.
EPS came in at $0.37. The 24 earnings estimates compiled by S&P Capital IQ predicted $0.37 per share. GAAP EPS of $0.37 for Q3 were 2.8% higher than the prior-year quarter's $0.36 per share.
Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.
For the quarter, gross margin was 68.9%, 30 basis points better than the prior-year quarter. Operating margin was 36.9%, 50 basis points worse than the prior-year quarter. Net margin was 23.8%, 80 basis points worse than the prior-year quarter.
Next quarter's average estimate for revenue is $558.0 million.
Next year's average estimate for revenue is $2.24 billion.
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 1,487 members out of 1,556 rating the stock outperform, and 69 members rating it underperform. Among 529 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 519 give Paychex a green thumbs-up, and 10 give it a red thumbs-down.
Of Wall Street recommendations tracked by S&P Capital IQ, the average price target is $31.47.
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Seth Jayson owned shares of the following at the time of publication: Paychex. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. Motley Fool newsletter services have recommended buying shares of Paychex. Motley Fool newsletter services have recommended creating a write covered straddle position in Paychex. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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