The 10-second takeaway
For the quarter ended Aug. 31 (Q1), Paychex met expectations on revenues and beat slightly on earnings per share.
Compared to the prior-year quarter, revenue expanded slightly and GAAP earnings per share grew.
Margins grew across the board.
Paychex reported revenue of $578.2 million. The 15 analysts polled by S&P Capital IQ wanted to see a top line of $583.7 million on the same basis. GAAP reported sales were 2.7% higher than the prior-year quarter's $563.1 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 $0.42. The 19 earnings estimates compiled by S&P Capital IQ predicted $0.41 per share. GAAP EPS of $0.42 for Q1 were 2.4% higher than the prior-year quarter's $0.41 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 71.6%, 130 basis points better than the prior-year quarter. Operating margin was 41.2%, 40 basis points better than the prior-year quarter. Net margin was 26.5%, 10 basis points better than the prior-year quarter.
Next quarter's average estimate for revenue is $574.9 million. On the bottom line, the average EPS estimate is $0.41.
Next year's average estimate for revenue is $2.34 billion. The average EPS estimate is $1.60.
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 1,480 members out of 1,552 rating the stock outperform, and 72 members rating it underperform. Among 531 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 519 give Paychex a green thumbs-up, and 12 give it a red thumbs-down.
Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Paychex is hold, with an average price target of $32.42.
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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. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend 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.