Shares of Paychex Inc. PAYX powered up 4.2% in premarket trading Wednesday, after the human resources outsourcing services company reported fiscal third-quarter earnings that beat expectations and lifted its profit growth outlook, citing “remarkable resiliency” of small businesses. Net income for the quarter to Feb. 28 rose to $467.4 million, or $1.29 a share, from $430.7 million, or $1.19 a share, in the year-ago period. Excluding nonrecurring items adjusted earnings per share increased to $1.29 from $1.15, and beat the FactSet consensus of $1.25. Revenue grew 8.2% to $1.38 billion, above the FactSet consensus of $1.36 billion, as service revenue increased 6.7% to $1.35 billion and interest on funds held for clients jumped 145% to $35.3 million. For fiscal 2023, the company kept its revenue growth guidance at approximately 8%, but raised its outlook for adjusted EPS growth to 13% to 14% from 12% to 14%. The current FactSet EPS consensus of $4.24 implies 12.5% growth. The company issued a statement regarding the volatility in the banking market following the recent bank closings: “We have no cash, restricted cash, or investments deposited with Silicon Valley Bank or Signature Bank and have met all client fund obligations related to employee payment services and remittances to applicable tax or regulatory agencies.” The stock has lost 5.7% year to date through Tuesday, while Industrial Select Sector SPDR exchange-traded fund XLI has been little changed and the S&P 500 SPX has gained 3.4%.
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