Paychex Q2 2019 earnings preview: strong cash balance to aid the performance

HR solutions company Paychex (PAYX) is scheduled post its second-quarter results on Wednesday, Dec. 19. Analysts expect the payroll processor to lift its earnings to $0.63 per share on revenue of $857 million.

For the previously reported quarter, Paychex reported better-than-expected results, helped by solid growth in human capital management products. Revenue rose 9% to $862.8 million, beating Wall Street expectations.

As it posted the results back in October, Paychex also posted fiscal 2019 outlook, where it expected management solutions revenue to increase by about 4%. Meanwhile, PEO and insurance services revenues were anticipated to increase about 18-20%.

In November, Paychex displayed the might of its strong cash balance and low debt as it agreed to buy privately-held professional employer organization Oasis Outsourcing Acquisition Corp based in West Palm Beach, Florida.

The addition of Oasis is expected to contribute considerably to Paychex’s revenues in the forthcoming quarters by allowing the company to expand to new markets and offer its HR solutions to a larger number of clients. The stock, which currently trades slightly above the levels seen about twelve months ago, continues to maintain the upward trend. It opened Monday’s session higher.

The addition of Oasis is expected to contribute considerably to Paychex’s revenues in the forthcoming quarters

Paychex CEO Martin Mucci said: “This acquisition will strengthen our PEO growth strategy, gain scale for new products with our insurance carrier partners, provide a new client base to offer Paychex retirement and time and attendance products, and augment our experienced management team. This is a great time for our two companies to come together.”

In October, Credit Suisse raised the stock to outperform from neutral, further highlighting the strength of the company’s payroll service.

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