Tags: Paychex | wobbly | hiring | PAYX

Paychex Wary of Wobbly Hiring Ahead

By    |   Thursday, 03 Nov 2011 03:29 PM

For a company that makes a living handling payrolls, improving economic indicators — falling unemployment rates especially — are essential. Executives at payroll processor Paychex (PAYX) say business is going strong but remain wary of the overall economy, particularly wobbly hiring figures to come.

So far, demand for the company's services has been solid. Total revenue for the first quarter of fiscal 2012 hit $563.1 million, up 9 percent from $518.3 million from the same quarter a year earlier. Net income rose by 13 percent to $148.9 million while diluted earnings per share rose 14 percent to 41 cents a share

"We continue to see positive trends in our checks per client. We remain cautiously optimistic about the remainder of the year, despite a lack of robust new business formation, which continues to impact the selling environment," company President and CEO Martin Mucci says in an earnings statement.

Payroll service revenue increased by 6 percent to $382.3 million for the first quarter compared with the same period last year. Human Resource Services revenue, meanwhile, increased 17 percent to $169.7 million for the first quarter compared to the same period last year.

Past acquisitions are paying off as well, including those of services firms SurePayroll and ePlan.

Watch the economy

Wall Street is keeping a steady outlook on the company's stock. RBC Capital Markets has reiterated a sector perform rating on the company while Barclays Capital says it's sticking with an equal weight. More recently, Goldman Sachs upgraded its recommendation on the stock two notches to hold from sell.

Company executives, however, are wary about the slow recovery. Even though the U.S. officially emerged from the Great Recession two years ago, unemployment rates remain high and hiring weak, and any declines could hurt payroll service providers.

"Although our first quarter results were encouraging, we expect fiscal 2012 results to be consistent with the expectations we had when we issued our guidance in June 2011. Our expectations are that checks per client will moderate through fiscal 2012, impacting quarterly comparisons for both payroll revenue and Human Resource Services revenue," the company says.

"We do not expect the favorability in expenses realized in the first quarter to continue throughout fiscal 2012, as we continue planned investments in our business."

The company will release second quarter earnings Nov. 29.

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For a company that makes a living handling payrolls, improving economic indicators falling unemployment rates especially are essential. Executives at payroll processor Paychex (PAYX) say business is going strong but remain wary of the overall economy, particularly...
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Thursday, 03 Nov 2011 03:29 PM
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