Post Earnings Coverage as Paychex Reported Better-than-Expected Q2 Earnings Numbers
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Upcoming AWS Coverage on Zhaopin Post-Earnings Results
LONDON, UK / ACCESSWIRE / December 30, 2016 / Active Wall St. announces its post-earnings coverage on Paychex, Inc. (NASDAQ: PAYX). The Company reported its financial results for the second quarter fiscal 2017 (Q2 FY17) on December 21, 2016. The Rochester, New York-based Company's Q2 FY17 total revenues and net income both grew 7% on a y-o-y basis. Register with us now for your free membership at: http://www.activewallst.com/register/.
One of Paychex's competitors within the Staffing & Outsourcing Services space, Zhaopin Ltd (NYSE: ZPIN), reported on November 23, 2016, its unaudited financial results for the first quarter of fiscal year 2017 ended September 30, 2016. AWS will be initiating a research report on Zhaopin in the coming days.
Today, AWS is promoting its earnings coverage on PAYX; touching on ZPIN. Get our free coverage by signing up to:
In the quarter ended on November 30, 2016, Paychex's reported total revenue of $771.4 million compared to total revenue of $722.4 million recorded at the end of Q2 FY16. However, total revenue numbers underperformed market estimates of $779 million. The Company's total service revenue also grew 7.0% y-o-y in Q2 FY17 to $760.0 million from $711.3 million for the year-ago same period.
The human resources services provider reported Q2 FY17 net income of $202.1 million, or $0.56 diluted per share, which came in above $189.2 million, or $0.52 diluted per share, in the prior year comparable quarter and above market consensus estimates of $0.55 per diluted share. Furthermore, the Company's adjusted net income for Q2 FY17 was $201.2 million, or $0.56 per diluted share, compared to $189.0 million, or $0.52 per diluted share, in Q2 FY16.
Operating Metrics
The Company's total expenses increased 8% to $460.3 million in the reported quarter from $428.2 million in Q2 FY16. Advance Partners contributed approximately one and one-half percent to the total expenses growth. Furthermore, the quarterly total expense growth was due to higher wages and related expenses resulting from increased headcount in operations.
During Q2 FY17, the Company's operating income grew 6% to $311.1 million from $294.2 million in the prior year's comparable quarter. Furthermore, operating income as a percentage of total revenue came in at approximately 40% similar to the figures recorded in the year ago same period.
Segment-wise
Paychex's Payroll service revenue grew 3% y-o-y to $440.9 million in Q2 FY17 from $427.4 million in Q2 FY16. Advance Partners contributed approximately 1% to this growth; while the Company attributed the remainder growth numbers to improved client base and revenue per check.
Due to increased client base across all major HCM services, Human Resource Services segment's revenue rose 12% y-o-y in Q2 FY17 to $319.1 million from $283.9 million in the prior year's comparable quarter.
Cash Flow and Balance Sheet
Paychex reported cash flow from operations of $413.4 million in the first six months of FY17 compared to $419.9 million in the prior year's same period. The decrease in operating cash flow was primarily attributed to fluctuations in working capital which was partially offset by higher net income adjusted for non-cash items. During the first half of FY17, working capital fluctuations contributed $147.0 million of cash outflows versus $111.5 million in the same period last year.
The Company reported cash and cash equivalents balance of $165.0 million on November 30, 2016, compared to $131.5 million as on May 31, 2016. Paychex has not reported any long-term debt in its books of accounts as of August 31, 2016. Furthermore, the Company has repurchased 2.9 million shares of its common stock for a total of $166.2 million in the six months ended November 30, 2016.
Outlook
For full year FY17, Paychex's expects Payroll Service revenue to increase in the range of 3% to 4%. The Company forecasts for an approximate 7% y-o-y growth in its net income; while adjusted net income is anticipated to increase approximately 8% during fiscal year ending May 31, 2017. The Company's management anticipates a 12% to 14% y-o-y growth in Human Resource Services revenue in FY17. Moreover, total service revenue is expected to increase in the range of 7% to 8% in the current fiscal year.
Stock Performance
At the closing bell, on Thursday, December 29, 2016, Paychex's stock rose slightly by 0.10%, ending the trading session at $61.40. A total volume of 989.05 thousand shares were traded at the end of the day. The stock has advanced 8.32% in the last three months, 4.86% in the previous six months, and 18.01% in the past twelve months. Moreover, the stock surged 19.99% since the start of the year. The stock is trading at a PE ratio of 28.65 and has a dividend yield of 3.00%.
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