Payroll And Human Resource Management Week In Review: Paychex And ADP

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This week in the Payroll and Human Capital Management industry, we saw Paychex (NASDAQ:PAYX) release its first quarter fiscal year 2015 earnings, reporting strong growth in revenue. Automatic Data Processing(NASDAQ:ADP) released a study that revealed a disconnect between the Human Resource (HR) departments and employees.

Paychex posts strong growth in revenue

Paychex’s service revenue in the first quarter fiscal year 2015 grew 9% on account of increase in pricing and new service offerings. [1] Its earnings per share grew 7% driven by a 5% increase in net earnings. During its earnings meet, Paychex indicated that they maybe be making acquisitions during the year. (Click here to read our analysis of Paychex’s earnings)

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Paychex’s stock rose 1.7% over the week through Thursday, to reach $43.68. On average, the stock traded on a volume 1.77 million shares. The stock has traded at a 52-week high of $45.95 and low of $39.21.

We currently have a price estimate of $41 for Paychex, approximately 6% lower than its current market price. We estimate revenues of $2.7 billion and EPS of $1.87 for this fiscal year, in line with consensus estimates.

Click here to see our complete analysis of Paychex

ADP’s study reveals disconnect between HR and employees

ADP Research Institute study on the HR department and its relationship with employees revealed that the HR and senior management are out of touch with their employees’ attitudes and perceptions. [2] Despite efforts from the HR to improve the relationship, employees seem to be disconnected and appear dissatisfied with HR policies, processes and functions. Employees rated various functions, especially those relating to workforce management, much lower than what was perceived by the HR. This presents an opportunity for HR outsourcing companies such as ADP to pitch their services to potential clients since they can state that employees are not satisfied with the in-house HR department.

ADP’s stock had been fluctuating between the range $82.3-$84 over the week through Thursday. On average, the stock traded on a volume 1.19 million shares. The stock has traded at a 52-week high of $84.68 and low of $69.91.

We currently have a price estimate of $74.3 for ADP, approximately 10% lower than its current market price. We estimate revenues of $13.17 billion and EPS of $3.49 for this fiscal year, in line with consensus estimates.

Click here to see our complete analysis of ADP

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Notes:
  1. Paychex’s Q1 FY 2015 10-Q SEC Filing, September 24, 2014, www.sec.gov []
  2. New ADP Research Institute® Study Shows Continuing Disconnect Between Human Resources Departments and Employees, September 23, 2014, www.adp.com []