Paychex reported higher-than-expected fiscal first-quarter results and reiterated its top- and bottom-line guidance for the full year, pointing to resilience among small and mid-sized businesses. Revenue rose to $1.32 billion for the three months ended Aug. 31, compared to $1.29 billion a year ago, surpassing the $1.31 billion average analyst estimate on Capital IQ.
Additionally, adjusted earnings per share rose to $1.16 from $1.14, aligning with market expectations for the first quarter. Management solutions revenue advanced 1% to reach $961.7 million as more clients sought human resources solutions. Meanwhile, revenue from professional employer organization and insurance solutions increased by 7% to $319.3 million. "Small and mid-sized businesses remain resilient as the US labor market gradually returns to its pre-pandemic level and wage inflation continues to moderate," stated Chief Executive John Gibson.
The performance was reflected in Paychex's stock, which rose by 4.3% in Tuesday trading. When excluding the impact of the Employee Retention Tax Credit program's expiration in April and considering one fewer payroll processing day during the quarter, the growth rate of revenue was more than double the reported growth rate, landing at 7%, according to Gibson.
"Despite these headwinds, we delivered earnings per share growth in the first quarter through strong expense discipline," he elaborated. For the full year, Paychex forecasts annual revenue growth in the 4% to 5.5% range, alongside adjusted EPS growth projected between 5% and 7%. The Capital IQ consensus estimates revenue and normalized EPS at $5.52 billion and $4.97, respectively. In addition to its revenue projections, Paychex lowered its other income guidance to a range of $30 million to $35 million from an earlier estimate of $35 million to $40 million.
The company now anticipates interest on funds held for clients to range between $145 million and $155 million, decreasing from a previous outlook of $150 million to $160 million, reflecting adjusted interest rate assumptions for the remainder of the fiscal year, as noted by Chief Financial Officer Bob Schrader during a conference call..