Paychex (PAYX) Tops Q2 EPS by 2c

Paychex (NASDAQ: PAYX) reported Q2 EPS of $0.65, $0.02 better than the analyst estimate of $0.63. Revenue for the quarter came in at $858.9 million versus the consensus estimate of $858.62 million.

Outlook

Our outlook for the fiscal year ending May 31, 2019 (“fiscal 2019”), is based upon current market expectations and economic conditions continuing with no significant changes. Our guidance has been revised for fiscal 2019. Excluding the anticipated impact related to the acquisition of Oasis, our revised guidance is as follows:

• Interest on funds held for clients is expected to increase in the range of 20% to 25%;
• Investment income, net is anticipated to be in the range of $10 million to $15 million;
• Net income is expected to increase approximately 4%;
• Diluted earnings per share is expected to increase approximately 4%; and
• Adjusted diluted earnings per share (non-GAAP) (1) is expected to increase in the range of 11% to 12%.

Other aspects of our guidance for fiscal 2019 remain unchanged from what we previously disclosed. This includes the following:

• Management Solutions revenue is anticipated to increase approximately 4%;
• PEO and Insurance Services revenue is anticipated to increase in the range of 18% to 20%;
• Total revenue, including interest on funds held for clients, is expected to increase in the range of 6% to 7%;
• Operating income, as a percent of total revenue, is anticipated to be approximately 37%;
• The effective income tax rate for fiscal 2019 is expected to be approximately 24%; and
• Adjusted net income (non-GAAP) (1) is expected to increase in the range of 11% to 12%.

We anticipate that the acquisition of Oasis, which is expected to close during our third fiscal quarter ending February 28, 2019, will have an incremental impact to total revenue in the range of $155 million to $175 million in fiscal 2019. Excluding one-time costs related to the acquisition, Oasis is anticipated to have minimal impact on earnings per share. One-time acquisition costs are anticipated to impact diluted earnings per share by approximately $0.03 per share in the balance of fiscal 2019.

For earnings history and earnings-related data on Paychex (PAYX) click here.

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