The end of an earnings season can be a great time to assess how companies are handling the current business environment and discover new stocks. Let’s take a look at how Paylocity (NASDAQ:PCTY) and the rest of the HR software stocks fared in Q3.
Modern HR software has two powerful benefits: cost savings and ease of use. For cost savings, businesses large and small much prefer the flexibility of cloud-based, web-browser-delivered software paid for on a subscription basis rather than the hassle and complexity of purchasing and managing on-premise enterprise software. On the usability side, the consumerization of business software creates seamless experiences whereby multiple standalone processes like payroll processing and compliance are aggregated into a single, easy-to-use platform.
The 6 HR software stocks we track reported a weak Q3; on average, revenues beat analyst consensus estimates by 2.5% while next quarter's revenue guidance was 3.5% below consensus. Stocks have faced challenges as investors prioritize near-term cash flows, but HR software stocks held their ground better than others, with share prices down 1.7% on average since the previous earnings results.
Best Q3: Paylocity (NASDAQ:PCTY)
Founded by payroll software veteran Steve Sarowitz in 1997, Paylocity (NASDAQ:PCTY) is a provider of payroll and HR software for small and medium-sized enterprises.
Paylocity reported revenues of $317.6 million, up 25.4% year on year, in line with analyst expectations. It was a weak quarter for the company, with underwhelming revenue guidance for the next quarter and full-year revenue guidance missing analysts' expectations.
“Our solid results continued into fiscal 24, with total revenue growth of 25% and recurring revenue growth of 19%, as our differentiated value proposition of providing the most modern software in the industry continues to resonate in the marketplace. In October, we held our annual Elevate Client Conference, where we connected with several thousand clients and further demonstrated our ongoing commitment to driving innovation with the announcement of two new product releases: Rewards & Recognition, which is designed to help clients improve employee retention by automating and customizing both peer and manager feedback, and Employee Voice, which combines AI with our proprietary, statistically validated engagement model to improve upon our existing Survey functionality and help clients aggregate, analyze, and act on employee feedback at a much larger scale,” said Steve Beauchamp, Co-Chief Executive Officer of Paylocity.
The stock is down 7.9% since the results and currently trades at $158.3.
Is now the time to buy Paylocity? Access our full analysis of the earnings results here, it's free.
One of the oldest service providers in the industry, Paychex (NASDAQ:PAYX) offers its customers payroll and HR software solutions.
Paychex reported revenues of $1.26 billion, up 5.7% year on year, falling short of analyst expectations by 0.7%. It was a weak quarter for the company, with a miss of analysts' revenue estimates and a decline in its gross margin.
Paychex had the slowest revenue growth among its peers. The stock is down 6.5% since the results and currently trades at $119.5.
Is now the time to buy Paychex? Access our full analysis of the earnings results here, it's free.
Weakest Q3: Paycom (NYSE:PAYC)
Founded in 1998 as one of the first online payroll companies, Paycom (NYSE:PAYC) provides software for small and medium-sized businesses (SMBs) to manage their payroll and HR needs in one place.
Paycom reported revenues of $406.3 million, up 21.6% year on year, falling short of analyst expectations by 1.2%. It was a weak quarter for the company, with full-year revenue guidance missing analysts' expectations and underwhelming revenue guidance for the next quarter.
Paycom had the weakest performance against analyst estimates and weakest full-year guidance update in the group. The stock is down 16.9% since the results and currently trades at $203.53.
Founded in 1992 as an outsourced payroll processor and transformed after the 2012 acquisition of Dayforce, Ceridian (NYSE:CDAY) is a provider of cloud based payroll and HR software targeted at mid-sized businesses.
Ceridian reported revenues of $377.5 million, up 19.6% year on year, surpassing analyst expectations by 2.2%. It was a mixed quarter for the company, with strong sales guidance for the next quarter but decelerating customer growth.
Ceridian achieved the highest full-year guidance raise among its peers. The company added 74,000 customers to reach a total of 6.35 million. The stock is up 2.5% since the results and currently trades at $65.59.
Found in 1990 in Cincinnati, Ohio, Paycor (NASDAQ: PYCR) provides software for small businesses to manage their payroll and HR needs in one place.
Paycor reported revenues of $143.6 million, up 21.4% year on year, surpassing analyst expectations by 2.9%. It was a mixed quarter for the company, with underwhelming revenue guidance for the next quarter and a decline in its gross margin.
The stock is up 13.5% since the results and currently trades at $20.28.
Join Paid Stock Investor Research
Help us make StockStory more helpful to investors like yourself. Join our paid user research session and receive a $50 Amazon gift card for your opinions. Sign up here.
The author has no position in any of the stocks mentioned