Paychex (PAYX) is expected to beat its "conservative" fiscal Q3 guidance, helped by the fees it earns for preparing and filing year-end tax forms for employers and by the extra client money it temporarily holds during the busy bonus season, RBC Capital Markets said Wednesday in a report.

The company had cautioned that it might face pressure on prices for those tax-form services and that some customers were asking for bigger discounts in its administrative-services business, RBC said. Still, Q3 is usually one of Paychex's strongest because many of those higher-margin year-end fees land during this period, the report said.

RBC said it is watching for risks to Paychex's full-year revenue outlook, since the company is counting on faster growth in Q4 despite a softer economy, pricing pressure, and challenges tied to new AI tools.

RBC lowered its price target on Paychex stock to $102 from $125 and maintained its sector perform rating.

Q3 results are due Wednesday.

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