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On Friday, Baird analysts adjusted their stance on Paycor HCM Inc (NASDAQ:PYCR), downgrading the stock from Outperform to Neutral and reducing the price target to $22.50 from the previous $28.00. The revision follows a thorough examination of the company’s recent fiscal second-quarter results and details from its 14C filing. According to InvestingPro data, Paycor has demonstrated impressive momentum with an 85% return over the past six months, despite trading at a relatively high EBITDA multiple of 50x.
The analysts at Baird, after considering the latest financial data and corporate disclosures, decided to modify their outlook on Paycor. Despite Paycor’s fiscal second-quarter performance meeting expectations and maintaining strong revenue growth of 15.7% year-over-year, the analysts see limited potential for any significant corporate developments or shareholder actions in the near future. InvestingPro subscribers can access 8 additional key insights about Paycor’s financial health and growth prospects through the platform’s comprehensive Pro Research Report.
The downgrade comes in the wake of Paycor’s acquisition announcement. Baird’s analysts had initially delayed altering their rating and price target for Paycor, anticipating possible new bids or shareholder initiatives, as they had observed with other firms in similar situations.
However, after a full review of the 14C disclosure, which companies use to provide information on significant corporate events, Baird’s team concluded that it is highly unlikely for any new bids or shareholder movements to occur. This assessment led to the revised Neutral rating and a lower price target for Paycor’s shares.
The analysts’ commentary sheds light on their decision-making process, noting, "We are reducing our rating of PYCR to Neutral and our price target to $22.50 following FQ2 results and a full review of the 14C filing." They added, "We initially held off on changing our rating and price target to see if any new bidders or shareholder actions would emerge post the acquisition announcement. After reviewing the 14C along with the FQ2 results that were generally in line with expectations, we believe that it is highly unlikely for any new action to develop."
In other recent news, Paycor HCM, Inc. reported a Q2 earnings beat with revenue up 13% year-over-year, surpassing analyst expectations. The company posted adjusted earnings per share of $0.14 for the quarter, beating the analyst estimate of $0.12. Revenue totaled $180.4 million, which was above the consensus estimate of $177.17 million, marking a 13% increase from the same quarter last year.
Recurring revenues, crucial for software-as-a-service businesses, rose 14% YoY to $167.4 million. Paycor also reported improved profitability, with adjusted operating income increasing 36% YoY to $31.8 million.
In addition to its earnings report, Paycor announced that it had entered into a definitive agreement to be acquired by Paychex (NASDAQ:PAYX), Inc. in an all-cash transaction valued at approximately $4.1 billion. Due to the pending acquisition, Paycor has suspended financial guidance for fiscal year 2025. These are some of the recent developments surrounding the company.
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