By Dhirendra Tripathi
Investing.com – Paychex stock (NASDAQ:PAYX) closed up 5.5% Wednesday after strong hiring among its clients took its second-quarter revenue and earnings past estimates. Revenue in the second quarter grew 13% year-on-year to $1.1 billion, and the company earned more revenue from each client. Adjusted profit per share rose 25% to 91 cents.
Growth momentum in the quarter ended November 30 also drove the HR solutions firm to raise its annual guidance again. Total revenue for the year is now seen growing by 10%-11%, up from the September forecast of an 8% growth. Its first forecast, given in June, had pegged the revenue growth at 7%. Adjusted operating margin is seen around 39.5%, an improvement of 1 percentage point from the last revision.
“Results were driven by growth in employees within our client base and continued strong sales growth and client retention,” Chairman and Chief Executive Officer Martin Mucci said in a release.
Mucci said the demand for HR advisory services and packages that address talent needs continued to be strong. "We most recently introduced an automated tool that businesses can leverage to capture and store employee vaccination status and communicate with their employees on an ongoing basis," he said, as an example of the company's adapting to current "complicated" climate.
Cowen analyst Brian Bergin raised his price target for Paychex from $120 to $130 after the earnings report, writing, "Expansion was driven by revenue outperformance and improving client employee headcount levels. Further, underlying margin improvement has been due to returns from investments in digitizing and automating sales & services." He also added that the third quarter view "implies flattish y/y performance due to hiring pickup, however PAYX views much of its recent improvement as sustainable."
(Published at 10:20am ET, updated at 4:04pm ET)