Paychex Stock Tumbles on Disappointing Sales, but Raises Fiscal 2024 Guidance

Shares of Paychex fell 6.2% to $119.96 on Thursday after the payroll services company reported lower-than-expected quarterly sales. Despite this setback, Paychex raised its fiscal 2024 guidance, which provided some optimism for investors. This decline marks the largest decrease for the stock since March 27, 2020, when it dropped 8.4%.

In the fiscal second quarter ended November 30, Paychex recorded adjusted earnings of $1.08 per share, surpassing Wall Street estimates by 1 cent. This figure also represents an increase from the year-ago quarter's earnings of 99 cents per share. However, total revenue of $1.26 billion did not meet expectations of $1.27 billion.

Paychex's President and CEO, John Gibson, addressed the current business landscape and stated, "The macro-economic environment remains stable for small and mid-sized businesses, who continue to face challenges in both the cost of and access to growth capital; and finding quality talent in the current labor market." Gibson further mentioned that their Small Business Employment Watch indicates a slowdown in both job growth and wage inflation.

Despite the sales miss, Paychex revised its outlook for the fiscal year ending May 31. The company expects its Professional Employer Organization and Insurance Solutions segment's revenue to grow between 7% and 9%, compared to the previous forecast of 6% to 9%. Furthermore, Paychex anticipates adjusted earnings for fiscal 2024 to grow between 10% and 11%, higher than the earlier projection of 9% to 11%.