Paychex (PAYX) To Post Q1 Earnings: Is A Beat In The Cards?

We expect Paychex Inc. (NASDAQ:PAYX) to beat expectations when it reports first-quarter fiscal 2018 results on Oct 23. In the last quarter, the company delivered a positive earnings surprise of 1.89%.

Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Paychex is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate (61 cents) and the Zacks Consensus Estimate (60 cents), is pegged at +0.06%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank #2 (Buy): Note that stocks with a Zacks Rank of #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Paychex’s Zacks Rank #2 and +0.06% ESP makes us reasonably confident about an earnings beat in the to-be-reported quarter.

Paychex, Inc. Price and EPS Surprise

What Is Driving Better-Than-Expected Earnings?

Paychex provides payroll and integrated human resource, and employee benefits outsourcing solutions for SMB in the United States.

We are encouraged by Paychex’s investments in product development and focus on building its sales force to support revenue growth. We believe that the company’s expansionary initiatives such as joint ventures and acquisitions support the long-term growth strategy.

The company’s recent acquisition of HROI will expand its services, consequently helping it to add to its customer base. Further, Paychex’s focus on small and mid-sized businesses looking for HR solutions is likely to provide growth opportunities.

Overall, we expect to witness an earnings beat from Paychex this time around.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

Alcoa Corp. (NYSE:AA) with an Earnings ESP of +6.80% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Constellation Brands Inc. (NYSE:STZ) with an Earnings ESP of +0.99% and a Zacks Rank #2.

Wintrust Financial Corp. (NASDAQ:WTFC) with an Earnings ESP of +0.40% and a Zacks Rank #2.

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