Paylocity Holding (PCTY) Q1 Earnings: What's In The Cards?

Paylocity Holding Corporation (NASDAQ:PCTY) is set to report first-quarter fiscal 2017 results on Nov 3. Last quarter, the company posted a positive earnings surprise of 16.67%. Let's see how things are shaping up for this announcement.

Factors to Consider

Paylocity reported better-than-expected results for the fourth quarter of fiscal 2016, wherein the loss was narrower than the Zacks Consensus Estimate and revenues topped.

We remain positive about Paylocity’s regular investments in SaaS technology. Notably, over the past few quarters, clients moving from traditional payroll service providers to the company’s SaaS-based services generated a significant portion of Paylocity’s revenues. Therefore, we believe that regular investments in technological upgrades, along with product innovations, will continue to boost the company’s top line over the long run. Such initiatives are also likely to have a positive impact on fiscal third-quarter results.

Furthermore, higher adoption of Paylocity’s ACA dashboard application, which specializes in tracking employee count, employee status and health care plan affordability, will act as a tailwind.

However, competition in the payroll processing sector from new entrants as well as existing players such as Automatic Data Processing, Inc. (NASDAQ:ADP) , Oracle Corporation (NYSE:ORCL) and SAP SE (DE:SAPG) remains a major headwind.

PAYLOCITY HLDG Price and EPS Surprise

Earnings Whispers

Our proven model does not conclusively show that Paylocityis likely to beat the Zacks Consensus Estimate in its upcoming release. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for Paylocity Softwareis 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 7 cents per share. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Paylocity has a Zacks Rank #2. Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a couple of stocks, which you may consider as our model shows that they have the right combination of elements to post an earnings beat in their upcoming releases:

Carmike Cinemas Inc. (NASDAQ:CKEC) with Earnings ESP of +600.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Methanex Corporation (NASDAQ:MEOH) with an Earnings ESP of +100.0% and a Zacks Rank #3.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>