Paychex Inc. (NASDAQ: PAYX) saw its shares surge 5.01% in pre-market trading on Wednesday after the payroll and human resources services provider reported better-than-expected third-quarter earnings and raised its full-year outlook.
For the quarter ended February 28, Paychex posted adjusted earnings per share of $1.49, topping analysts' estimates of $1.48. Revenue grew 4.8% year-over-year to $1.51 billion, in line with expectations. The company's performance was driven by growth in its client base and improved operational efficiency.
"The third quarter of this fiscal year has been a transformational time at Paychex," said President and CEO John Gibson. "As we position ourselves for the digitally and AI driven future of human capital management, we believe the combination of our continued positive momentum and the pending acquisition of Paycor positions Paychex for continued growth."
Notably, Paychex's adjusted operating margin expanded to 46.9% from 45.1% in the same quarter last year, reflecting the company's focus on automation and technology investments to boost efficiency. Management Solutions revenue, the company's largest segment, increased 5% to $1.1 billion, driven by growth in the number of clients served and higher revenue per client.
Looking ahead, Paychex raised its fiscal 2025 outlook for PEO and Insurance Solutions revenue growth to a range of 6.0% to 6.5%, up from its previous guidance. The company also reaffirmed its expectations for other aspects of its full-year performance.
Investors were particularly encouraged by Paychex's pending acquisition of Paycor, a leading provider of HCM, payroll, and talent software. The acquisition, expected to close in April 2025, is set to extend Paychex's upmarket position and expand its suite of HR technology and advisory solutions.
As Paychex continues to navigate the evolving landscape of human capital management, the company's strong quarterly performance and strategic moves appear to have resonated well with investors, driving the significant stock price increase in pre-market trading.
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