HR and payroll services drive Paychex profit higher

Paychex (PAYX) reported a 17% jump in earnings for the fourth quarter, helped by an increase in revenue from HR services and payroll services, besides lower income tax. The company’s stock inched up 0.29% in the premarket as its revenue exceeded the Street’s expectations.

With revenue increasing 9% to $871.1 million, the company’s earnings grew double-digits to $228.5 million or $0.63 per share. Adjusted EPS rose 13% to $0.61.

Human Resource Services (HRS) revenue increased 17% to $401 million, primarily driven by increases in client base. The company’s largest HRS revenue stream is Paychex HR Services, which includes administrative services and professional employer services. Rising demand for these resulted in double-digit growth in client worksite employees served as of May 31, 2018, compared to last year.

Payroll service revenue rose 3% to $452.4 million, riding on growth in revenue per check, which improved as a result of price increases. As of May 31, 2018, including the Lessor acquisition, Paychex served over 650,000 payroll clients.

Looking ahead into fiscal 2019, the company expects total revenue, including interest on funds held for clients, to increase in the range of 6-7% and adjusted EPS growth of about 11%. Payroll service revenue is expected to grow in the range of 2-3%, incorporating a full year of the lessor. HRS revenue is predicted to increase in the 15-20% range.

Shares of Paychex ended Tuesday’s regular trading session down 0.98% at $69 on the Nasdaq. The stock had been trading between $54.20 and $73.10 for the past 52 weeks.