Jefferies has revised its price target for Paychex (PAYX, Financial), lifting it from $215 to $250, while maintaining a Hold rating on the company's shares. This adjustment comes as the firm updates its models within the software sector.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 14 analysts, the average target price for Paychex Inc (PAYX, Financial) is $146.03 with a high estimate of $158.00 and a low estimate of $130.00. The average target implies an downside of 6.45% from the current price of $156.09. More detailed estimate data can be found on the Paychex Inc (PAYX) Forecast page.
Based on the consensus recommendation from 17 brokerage firms, Paychex Inc's (PAYX, Financial) average brokerage recommendation is currently 3.1, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Paychex Inc (PAYX, Financial) in one year is $145.49, suggesting a downside of 6.79% from the current price of $156.09. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Paychex Inc (PAYX) Summary page.
PAYX Key Business Developments
Release Date: March 26, 2025
- Total Revenue Growth: 5% in the third quarter; 6% excluding the impact of the discontinued ERTC program.
- Diluted Earnings Per Share: Increased 4% to $1.43 per share.
- Adjusted Diluted Earnings Per Share: Grew 8% to $1.49 per share.
- Adjusted Operating Margins: Increased by 180 basis points compared to the prior year.
- Management Solutions Revenue: Increased 5% to $1.1 billion.
- PEO and Insurance Solutions Revenue: Increased 6% to $365 million.
- Interest on Funds Held for Clients: Decreased 2% to $43 million.
- Total Expenses: Increased 1% to $801 million, excluding one-time costs related to the pending Paycor acquisition.
- Operating Income: Grew 6% to $692 million with an operating margin of 45.8%.
- Cash, Restricted Cash, and Total Corporate Investments: $1.7 billion as of February 28, 2025.
- Total Borrowings: Approximately $817 million as of February 28, 2025.
- Cash Flow from Operations: $1.6 billion in the first three quarters of the year.
- Return to Shareholders: $1.2 billion in the form of cash dividends and share repurchases during the first three quarters.
- 12-Month Rolling Return on Equity: 45%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Paychex Inc (PAYX, Financial) reported a 5% increase in total revenue for the third quarter, with a 6% growth excluding the impact of the discontinued ERTC program.
- Diluted earnings per share increased by 4%, and adjusted diluted earnings per share grew by 8% during the quarter.
- The acquisition of Paycor is expected to strengthen Paychex Inc (PAYX)'s competitive position and is anticipated to be accretive to adjusted earnings per share next fiscal year.
- Client retention has improved over last year's performance, with retention in HR outsourcing solutions remaining near record levels.
- Paychex Inc (PAYX) was named one of Fortune's Most Innovative Companies for the third consecutive year, highlighting its commitment to innovation and technology.
Negative Points
- The expiration of the ERTC program continues to present a revenue headwind, impacting overall revenue growth.
- Enrollment in the specialty Florida at-risk medical plan decreased year-over-year, affecting pass-through revenue.
- Interest on funds held for clients decreased by 2% due to lower average interest rates.
- The macro environment presents challenges, with U.S. job growth moderating and customer employment levels softer than expected.
- The acquisition of Paycor involves significant integration efforts and potential risks related to change management and achieving expected synergies.
