Paychex (PAYX) slightly exceeded fiscal Q2 revenue expectations on the back of higher interest income on client funds despite challenges from Employee Retention Tax Credit impacts, RBC Capital Markets said in a note emailed Friday.
Despite the headwinds, Paychex effectively managed costs and improved operating margins through expense control and strategic investments in global operations, the investment firm said.
Demand, customer retention and mid-market Human Capital Management sales are expected to drive accelerating Management Solutions growth as ERTC-related issues subside, RBC analysts noted.
Improved optimism among small businesses, as shown by the rise in the Small Business Optimism Index, points to a supportive environment for Paychex's services, RBC said.
RBC has a sector perform rating for Paychex with a $148 price target.
Price: 139.18, Change: +1.37, Percent Change: +0.99
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