Paychex Q4 Profit Rises 12%, Revenue Up 7% - Update 1

(RTTNews) - Payroll processing services provider Paychex Inc. (PAYX | Quote | Chart | News | PowerRating) Thursday reported a 12% growth in fourth-quarter profit on higher revenues and a decline in expenses. Looking ahead, the company said it expects growth in its 2009 earnings and revenues.

Net income for the quarter increased to $135.48 million or $0.38 per share from $121.10 million or $0.32 per share in the year ago quarter.

On average 16 Analysts polled by First Call/Thomson Financial expected the company to report earnings of $0.38 per share for the quarter.

Total revenues for the quarter advanced 7% to $519.23 million from $487.35 million in the prior-year quarter. Twelve analysts had consensus revenue estimate of $529.05 million for the quarter.

Payroll service revenue for the quarter increased 6% to $365.5 million and Human Resource Services revenue rose 15% to $122.4 million from the year-ago quarter.

The Rochester, New York-based Paychex recorded operating income of $197.80 million for the quarter, up 24% from $159.88 million in the prior-year quarter.

Total expenses for the quarter declined 2% to $321.42 million from $327.47 million in the prior-year quarter.

Net income for fiscal 2008 increased to $576.15 million or $1.56 per share from $515.45 million or $1.35 per share in fiscal 2007. Annual revenues rose 10% to $2.07 billion from $1.89 billion a year earlier.

The Street expected the company to report earnings of $1.57 per share on revenues of $2.08 billion for the year.

On Tuesday, Analysts at Lehman Brothers reiterated their 'overweight' rating on Paychex, while reducing the target price from $41 to $40.

For fiscal 2009, the company expects net income to increase in the range of 2% to 4%, on a projected revenue growth between 7% and 9%. Annual operating income, net of certain items, is expected to rise about 13%. Analysts expect earnings of $1.69 per share on revenues of $2.24 billion for 2009.

Paychex expects its stock repurchase program, completed in 2007, to impact net income and diluted earnings per share growth for the first two quarters of fiscal 2009, with diluted earnings per share growing at a higher rate than net income.

Jonathan Judge, Chief Executive Officer of Paychex, commented, "This year is a milestone for us as total revenue exceeded $2 billion for the first time. In addition, we have realized solid profits during a period of declining interest rates as the Federal Funds rate decreased 325 basis points since June 1, 2007."

PAYX closed Thursday's trading at $32.04, down 0.05 or 0.16%, on a volume of about 6.59 million shares.

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