Hot Tech stock to watch: Paychex, Inc. (NASDAQ: PAYX)

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Paychex, Inc. (NASDAQ: PAYX) stock rose over 6% on 26th March, 2020 (As of 12:52 pm GMT-4; Source: Google finance) after the company posted better than expected results for the third quarter of FY 20. The company ended the third-quarter fiscal 2020 with cash and cash equivalents of $780 million compared to $600.6 million at the end of the prior quarter. Long-term debt stood at $796.7 million compared to $796.6 million in the prior quarter. The company generated cash from operating activities of $488.1 million in the third quarter.

PAYX in the third quarter of FY 20 has reported the adjusted earnings per share of 97 cents, beating the analysts’ estimates for the adjusted earnings per share by 2.1%, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 7 percent to $1.14 billion in the third quarter of FY 20, beating the analysts’ estimates for revenue by 0.5%. Operating income rose 10% year over year to $470.1 million and operating margin increased to 41.1% from 40.1% in the year-ago quarter. EBITDA increased 8% to $520.5 million year over year and EBITDA margin increased to 45.6% compared with 45% in the year-ago quarter.

Moreover, the revenues from Management Solutions increased 6% year over year to $850 million on the back of increase in the company’s client base and revenue per client. PEO and insurance services revenues were up 10% to $271.5 million from the year-ago quarter.

Additionally, during the nine months, the company had repurchased 2 million shares of the common stock for a total of $171.9 million compared to  repurchase of 0.5 million shares for a total of $32.8 million in the corresponding period last year. During the third quarter, the company paid out $222.5 million in dividends.

For fiscal 2020, the company expects Management Solutions revenue to grow approximately 4%, PEO and Insurance Solutions revenue is expected to grow approximately 24%, Interest on funds held for clients is projected to decline in the range of 2% to 3%, total revenue is expected to grow in the range of 8% to 9%, Operating margin is projected to be approximately 36%, EBITDA margin is expected to be approximately 41%, Other expense, net is projected to be in the range of $22 million to $24 million, the effective income tax rate is expected to be in the range of 23.5% to 24.0% and adjusted net income and adjusted diluted earnings per share are projected to grow approximately 6%.

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