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Payroll processor Paychex misses revenue estimates on weak client spending

Published 04/02/2024, 09:56 AM
Updated 04/02/2024, 10:00 AM

(Reuters) - Paychex (NASDAQ:PAYX) missed Wall Street estimates for third-quarter revenue on Tuesday, hurt by sluggish client spending on its human capital management and payroll services, sending its shares down nearly 4% in early trading.

The higher-for-longer interest rates and economic uncertainties have compelled clients to cut spending budgets, affecting demand for payroll services providers such as Paychex.

"Small- and medium-sized businesses are dealing with a tight job market for qualified workers, reduced access to affordable growth capital and inflationary pressures," said Paychex CEO John Gibson.

Peer Paycom (NYSE:PAYC) also provided a somber first-quarter revenue forecast due to weak client spending on its services.

Paychex reported revenue of $1.44 billion for the quarter ended Feb. 29, missing average analysts' estimate of $1.46 billion, according to LSEG data.

The company's earnings per share was at $1.38, compared with $1.29 per share a year ago.

Paychex forecast total revenue growth of 5% to 6% for full year 2024, below analysts' estimate of a 6.4% growth.

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