Paychex (PAYX 56.87, -1.75) has given up 3.0% after reporting a slim bottom-line beat and issuing cautious guidance.
The company, which allows small businesses to outsource their payroll, human resource, and benefits management, reported above-consensus fourth quarter earnings of $0.54 per share on a 6.0% year-over-year increase in revenue to $799 million, which was just ahead of expectations.
Service revenue grew 2.0% to $440.90 million due to growth in revenue per check, resulting from price increases. At the end of May, the company had served 605,000 payroll clients, which was little changed year-over-year. The company noted that it experienced higher client attrition for the fiscal year when compared to the prior year.
Human Resource Services revenue grew 10.0% to $343.70 million due to increases in the company's client base across all major services, including comprehensive outsourcing, retirement, time & attendance, and human resource administration. Retirement services revenue benefited from growth in asset fee revenue earned on the asset value of participants' funds. Insurance services revenue benefited from continued growth of full-service ACA product and growth in health and benefit applicants, coupled with higher average premiums in the company's workers' compensation insurance product.
Interest on funds held for clients grew 14.0% to $14.00 million. Average investment balances were down 2.0% during the fourth quarter.
Looking ahead, the company expects that earnings during fiscal year 2018 will grow between 7.0% and 8.0%, which is shy of current market expectations. Revenue is expected to grow about 5.0% to $3.31 billion, which is also below market estimates.