(By Balaseshan) Paychex Inc. (NASDAQ: PAYX) reported a 5% increase in quarterly earnings helped by a double-digit growth in human resources services revenue and a moderate increase in new payroll sales. Revenue missed consensus, while earnings came in-line with Street's expectations.
Earnings for the second quarter were $147.9 million or $0.41 per share, up from $140.4 million or $0.39 per share last year.
Revenue increased 4% to $569.4 million.
Analysts, on average, polled by Thomson Reuters had expected a profit of $0.41 per share on revenue of $573.03 million for the second quarter.
Payroll service revenue rose 1% to $377.0 million. Checks per payroll increased 1.2%. Revenue per check grew modestly, impacted by price increases, partially offset by discounting. Growth in payroll service revenue was tempered by lost revenue from Hurricane Sandy, approximating 0.5% of payroll revenue growth, and the impact of client mix in the mid-market.
Human resource services revenue grew 12% to $182.4 million. Paychex HR Solutions revenue was positively impacted by price increases and growth in both clients and client employees. Retirement services revenue was positively impacted by client growth and an increase in the average asset value of retirement services client employees' funds.
Interest on funds held for clients decreased 8% to $10.0 million, due to lower average interest rates earned, offset by a 4% increase in average investment balances.
Looking ahead into the fiscal 2013, the company still expects earnings to increase 5% to 7% and service revenue growth of 5% to 6%. Street analysts expect earnings per share to increase 6% from last year on revenue growth of 4.90%.
Interest on funds held for clients and investment income for fiscal 2013 are expected to continue to be impacted by the low interest rate environment, the company said.
PAYX closed Wednesday's regular session down 0.33% at $33.05. The stock has been trading between $28.76 and $34.70 for the past 52 weeks.