Research Desk Line-up: Resources Connection Post Earnings Coverage
LONDON, UK / ACCESSWIRE / October 12, 2017 / Pro-Trader Daily has just published a free post-earnings coverage on Paychex, Inc. (NASDAQ: PAYX), which can be viewed by registering at http://protraderdaily.com/optin/'symbol=PAYX, following the Company's release of its first quarter fiscal 2017 financial results on October 03, 2017. The payroll processor and human-resources services provider outperformed top- and bottom-line expectations and provided guidance for the fiscal year 2018. Our daily stock reports are accessible for free, and with those to look forward today you also will be signing up for a complimentary member's account at:
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Get more of our free earnings reports coverage from other constituents of the Staffing & Outsourcing Services industry. Pro-TD has currently selected Resources Connection, Inc. (NASDAQ: RECN) for due-diligence and potential coverage as the Company announced on October 04, 2017, its financial results for Q1 FY18 which ended on August 26, 2017. Register for a free membership today, and be among the early birds that get access to our report on Resources Connection when we publish it.
At Pro-TD, we make it our mission to bring you news that matter about the stock you follow. Today, our research desk covers a blog story on PAYX; also brushing on RECN. With the links below you can directly download the report of your stock of interest free of charge at:
http://protraderdaily.com/optin/'symbol=PAYX
http://protraderdaily.com/optin/'symbol=RECN
Earnings Reviewed
Paychex reported total revenue of $816.8 million for the three months ended August 31, 2017, reflecting an increase of 4% from revenue of $785.5 million in Q1 FY17. The Company's total service revenue of $803.1 million for the reported quarter rose 4% from $773.5 million for the prior year's same quarter. Paychex's revenue numbers topped analysts' estimates of $816.0 million.
During Q2 FY18, Paychex's total expenses increased 2% to $471.8 million on a y-o-y basis. The increase in total expenses was primarily driven by the Company's investments in technology along with continued growth in its professional employer organization (PEO).
Paychex's operating income increased 7% to $345.0 million on a y-o-y basis for Q1 FY18 compared to operating income of $323.0 million for Q1 FY17. The Company's operating income, as a percent of total revenue, was 42.2% for the reported quarter compared to 41.1% for the prior year's corresponding quarter.
For Q1 FY18, Paychex's net income and diluted earnings per share each increased 5% to $227.8 million and $0.63 per share, respectively, compared to net income of $217.4 million, or $0.60 per diluted share, respectively, for the year-ago same period. The Company's adjusted net income increased 9% to $222.8 million, while adjusted diluted earnings per share jumped 11% to $0.62 per share for the reported quarter and ahead of Wall Street's estimates of $0.60 per share.
Paychex's Segment Results
During Q1 FY18, Payroll service's revenue totaled $457.8 million, up 2% compared to revenue of $450.9 million in Q1 FY17, primarily driven by growth in revenue per check, which improved as a result of price increases, net of discounts.
The Company's Human Resource Services' ("HRS") revenue grew 7% to $345.3 million on a y-o-y basis compared to $322.6 million for Q1 FY17. HRS' revenue growth was primarily driven by increases in Paychex's client base across most major HCM services, including: comprehensive HR outsourcing services; retirement services; time and attendance; and insurance services.
During Q1 FY18, the Company's interest on funds held for clients increased 14% to $13.7 million on a y-o-y basis. The increase resulted primarily from higher average interest rates earned. The funds held for clients' average investment balances were relatively flat for the reported quarter as the impact from wage inflation was offset by a decrease in checks per client.
Financial Position and Liquidity
As of August 31, 2017, Paychex had cash and total corporate investments of $851.4 million. The Company's primary source of cash is generated from its ongoing operations. Paychex's short-term borrowings totaled $57.2 million as of August 31, 2017.
During Q1 FY18, Paychex's cash flows from operations were $343.6 million, reflecting growth of 17% on a y-o-y basis, attributable to higher net income along with positive cash flow impacts from timing related to income taxes and PEO's payroll accruals and unbilled receivables.
During Q1 FY18, Paychex repurchased 1.6 million shares of its common stock for a total of $94.1 million. Additionally, the Company's Board of Directors approved a 9% increase in the quarterly dividend to shareholders to $0.50 per share from $0.46 per share.
Outlook
For the fiscal year ending May 31, 2018, Paychex is forecasting HRS' revenue to grow in the range of 12% to 14%, while the Company's total revenue is expected to grow approximately 6% on a y-o-y basis. For FY18, Paychex's operating income as a percent of total revenue is anticipated to be in the range of 39% to 40% and the effective income tax rate is anticipated to be in the range of 35.0% to 35.5%.
Stock Performance
On Wednesday, October 11, 2017, the stock closed the trading session at $63.48, marginally down 0.36% from its previous closing price of $63.71. A total volume of 2.84 million shares have exchanged hands, which was higher than the 3-month average volume of 2.21 million shares. Paychex's stock price surged 10.98% in the last three months, 8.61% in the past six months, and 13.30% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have gained 4.27%. The stock is trading at a PE ratio of 28.16 and has a dividend yield of 3.15%. At Wednesday's closing price, the stock's net capitalization stands at $22.54 billion.
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