Paychex Sales Increase, but Still Miss Estimates

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Paychex (NAS: PAYX) reported earnings on Dec. 20. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Nov. 30 (Q2), Paychex missed slightly on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue increased, and earnings per share expanded.

Gross margins increased, operating margins expanded, and net margins contracted.

Revenue details
Paychex tallied revenue of $546 million. The 17 analysts polled by S&P Capital IQ predicted revenue of $552 million. Sales were 6.6% higher than the prior-year quarter's $512 million.

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Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions.

EPS details
EPS came in at $0.39. The 21 earnings estimates compiled by S&P Capital IQ predicted $0.38 per share. GAAP EPS of $0.39 for Q2 were 5.4% higher than the prior-year quarter's $0.37 per share.

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Source: S&P Capital IQ. Quarterly periods. Figures may be non-GAAP to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 69.7%, 80 basis points better than the prior-year quarter. Operating margin was 39.9%, 10 basis points better than the prior-year quarter. Net margin was 25.7%, 50 basis points worse than the prior-year quarter.

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Source: S&P Capital IQ. Quarterly periods.

Looking ahead
What does the future hold?

Next quarter's average estimate for revenue is $571 million. On the bottom line, the average EPS estimate is $0.37. (There are 17 revenue estimates and 20 EPS estimates.)

For the full year ending 2012, the average estimate for revenue is $2.2 billion. The average EPS estimate is $1.51. (There are 19 revenue estimates and 21 EPS estimates.)

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 1,434 members out of 1,499 rating the stock outperform, and 65 members rating it underperform. Among 558 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 550 give Paychex a green thumbs-up, and eight give it a red thumbs-down.

At the time this article was published Seth Jayson owned shares of the following at the time of publication: Paychex. You can view his stock holdings here. He is co-advisor ofMotley 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. 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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