Paychex Fiscal Third-Quarter Earnings Top Street Views Amid Revenue Growth

Paychex on Wednesday reported higher-than-expected fiscal third-quarter earnings, buoyed by revenue growth across its two main business segments.

The human resources, payroll and benefits management provider's adjusted earnings rose to $1.49 a share for the quarter ended February from $1.38 the year before. The consensus on FactSet was for non-GAAP EPS of $1.48. Revenue improved 5% to $1.51 billion, largely in line with the Street's view.

Management solutions revenue rose 5% to $1.1 billion amid growth in its client base. Professional employer organization and insurance solutions advanced 6% to $365.4 million.

The stock increased 5.8% in Wednesday trade.

"The third quarter of this fiscal year has been a transformational time at Paychex," Chief Executive John Gibson said in a statement. "As we position ourselves for the digitally and (artificial intelligence) driven future of human capital management, we believe the combination of our continued positive momentum and the pending acquisition of Paycor positions Paychex for continued growth."

Paychex struck a $4.1 billion deal in January to buy human capital management company Paycor HCM (PYCR) as part of its efforts to expand its upmarket position and boost AI capabilities. The transaction is expected to complete in April.

Overall third-quarter expenses grew to $817.2 million from $789.5 million in the prior-year period, due to factors including costs related to the Paycor acquisition and an increase in professional employer organization direct insurance costs, according to the company.

For fiscal 2025, Paychex continues to project adjusted EPS growth of 5% to 7% and revenue to increase between 4% and 5.5%. The Street is looking for non-GAAP EPS of $4.99 and sales of $5.52 billion. The outlook excludes any impact from the proposed Paycor deal, the company said.

The firm now anticipates professional employer organization and insurance solutions revenue to rise by 6% to 6.5% for the fiscal year, down from its previous growth guidance of 7% to 9%, according to an earnings presentation. The management solutions guidance was maintained at 3% to 4% growth.

Including Paycor, the company estimates consolidated revenue to advance by 10% to 12% in the ongoing quarter, the presentation showed. The impact from the transaction is expected to be neutral to adjusted EPS in the period, Paychex said. The market's current view is for non-GAAP EPS of $1.21 and sales of $1.37 billion.