Paychex Profit Up 6%, But Revenue Misses Estimates

(RTTNews) - Payroll processor Paychex Inc. (PAYX), Monday reported a six percent increase in first-quarter profit, mainly on growth at its human resource services segment. While quarterly earnings topped Wall Street estimates, revenue came in short of expectations.

For fiscal year 2014, the company continues to expect net income growth of 8 percent to 9 percent.

Paychex processes payroll, handles employee benefits, and offers related human resources services. Its fortunes are tied to employment and interest rate levels that weigh on the Paychex client growth.

Paychex has been beefing up its operations. Recently, the company indicated expanding its services in South America through a joint venture in Brazil, and also recently acquired a payroll provider in Germany.

Paychex CEO Martin Mucci said the company is seeing growth in core payroll and human resource services. Mucci is also hopeful of benefiting from investments in software-as-a-service technology and mobile applications.

During the first quarter, Paychex Human Resource services revenue grew 11 percent from last year, led by client base growth in its retirement services, Paychex HR Solutions, and eServices products, and by price.

Payroll service revenue was up a modest 2 percent. While checks per payroll rose 1.6 percent, partly offset by discounting.

The Rochester, New York-based company posted total revenue of $598 million for the quarter, up 5 percent from $568 million last year.

Service revenue grew to $598 million from $568 million in the prior year. On average, 19 analysts polled by Thomson Reuters estimated revenue of $605.66 million for the quarter.

Net earnings for the quarter were $163 million or $0.44 per share, compared with $153 million or $0.42 per share last year. Analysts expected earnings of $0.43 per share for the quarter. Analysts' estimates typically exclude special items.

Paychex stock closed Monday at $40.64, up $0.29 or 0.72%, on a volume of 2.7 million shares on the Nasdaq. In after hours, the stock dropped $0.64 or 1.57%, trading at $40.00. For the 52-week period, the share trended in a range of $30.55 - $41.24.