Key Takeaways
- Paychex shares dropped as revenue came in short of forecasts, with demand affected by macroeconomic pressures on businesses.
- The payroll services provider’s profit exceeded estimates, although expenses increased.
- Paychex shares rose earlier this week to reach their highest level in 2023, and the stock remains in positive territory for the year.
Paychex (PAYX) was Thursday’s worst-performing stock in the S&P 500 after the payroll services provider missed revenue estimates, with demand squeezed by macroeconomic conditions.
The company reported that revenue rose 5.7% year over year to $1.26 billion, while analysts had been looking for $1.27 billion. Earnings per share (EPS) came in at a more-than-expected $1.08.
Total Service revenue was up 5% from a year ago to $1.2 billion. By segment, Management Solutions revenue added 4% to $930.7 million, and Professional Employer Organization and Insurance Solutions revenue increased 8% to $295.7 million.
Expenses were $751.7 million, a 5% jump from the previous year, primarily because of higher labor and insurance costs, as well as investments in technology, sales, and marketing.
CEO John Gibson explained that small and mid-sized businesses “continue to face challenges in both the cost of and access to growth capital; and finding quality talent in the current labor market.”
Shares of Paychex closed 7% lower on Thursday. They had hit a 2023 high on Tuesday, and even with today’s declines, they remain in positive territory for the year.
TradingView