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Paychex Profit Rises, Meets Street; Reaffirms FY Outlook


Paychex Inc. (PAYX) Monday reported a three percent rise in profit for the first quarter, on growth at human resource services business that benefited from price increases and client growth, along with a modest improvement at its Payroll segment. Paychex's
quarterly earnings matched Street estimates, while revenues missed their view.

Moving forward, Paychex reaffirmed its outlook for the fiscal year 2013.

Paychex provides payroll, human resource, and benefits outsourcing solutions for small to medium-sized businesses. It offers payroll processing services that include the calculation and delivery of employee payroll checks as well as production of internal accounting records.

The company, which competes with Automatic Data Processing Inc. (ADP), has reported higher profits over the past quarters. But high unemployment level and lower interest rates have put pressure on earnings and the company has not been able to its grow client base or increase the interest on funds held for clients.

During the quarter, Paychex's total service revenue increased 3.0 percent year-over-year.

At Payroll service segment, which accounts for a large part of business, revenues edged up 1.0 percent from last year. Checks per payroll increased 2.0 percent, compared to 2.4 percent in the prior year. Revenue per check grew modestly on price increases, but was partly offset by discounting.

Human resource services segment revenues grew 7.0 percent, on favorable checks per payroll, price increases and client growth.

CEO Martin Mucci said, "...Our client base continued to improve, checks per payroll continued to increase, and our client retention is near a historic high. Growth rates reflect fluctuations in the frequency of payroll processing compared to the same period last year..."

Rochester, New York-based Paychex reported first quarter net income of $153.0 million or $0.42 per share, up from $149.0 million or $0.41 per share last year.

On average, 20 analysts polled by Thomson Reuters expected the company to earn $0.42 per share for the fourth quarter.

Paychex reported quarterly revenues of $578.0 million, compared to $563.0 million a year ago. Sixteen analysts had a consensus revenue estimate of $584.05 million.

For fiscal year 2013, Paychex continues to estimate net income to grow 5 to 7 percent and total service revenues to grow 5 to 6 percent over fiscal 2012. Payroll service revenues are expected to grow 3 to 4 percent, and human resource services revenues are expected to grow 9 to 11 percent.

Shares of Paychex closed Monday at $34.38, down 0.49%, on a volume of 2.2 million shares on the Nasdaq. In after hours, the stock dropped $0.12 or 0.35%. In the past year, the stock has traded in a range of $25.20 - $34.70.

by RTTNews Staff Writer

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