Paychex price target lowered to $152 by Stifel on revenue guidance

Investing.com - Stifel lowered its price target on Paychex (NASDAQ:PAYX) to $152.00 from $156.00 on Thursday, while maintaining a Hold rating on the payroll services provider. According to InvestingPro data, the stock currently trades at $137.94, with analyst targets ranging from $122 to $165.

The price target reduction follows Paychex’s fourth-quarter results and fiscal 2026 guidance released on Wednesday, which triggered a 9% drop in the company’s stock price. Paychex reported organic revenue growth of 3.3% for the fourth quarter, below the consensus estimate of 4.5%. InvestingPro analysis indicates the stock is currently in oversold territory based on RSI indicators, while maintaining impressive gross profit margins of 72.35%.

The company’s fiscal 2026 revenue guidance of 4.5-5.5% organic growth also fell short of analyst expectations of 5.8%, though its earnings per share guidance of 8.5-10.5% growth exceeded the consensus forecast of 7%. Despite current market challenges, Paychex maintains strong financial health with an overall "GOOD" rating from InvestingPro, supported by its 38-year track record of consistent dividend payments.

Stifel noted that reconciling the fourth quarter’s 3% organic revenue growth with the fiscal 2026 guidance of 5% presents a challenge. The firm explained that last year’s early implementation of annual price increases distorted year-over-year comparisons, and when normalized, management solutions growth, which represents 73% of revenue, approximated 5%.

The firm also highlighted that Paychex’s PEO revenue growth, accounting for 24% of total revenue, was negatively impacted by a company-specific issue that will anniversary in the second half of fiscal 2026, while management reported the installed customer base remains stable despite some weakening data points.

In other recent news, Paychex Inc . reported its fourth-quarter financial results for fiscal year 2025, showcasing steady growth despite market challenges. The company achieved an adjusted diluted earnings per share (EPS) of $1.19, aligning with analysts’ expectations, and revenue also met forecasts, reaching $1.43 billion. Paychex’s Q4 revenue increased by 10% year-over-year, driven by a 12% surge in its Management Solutions segment. For the full fiscal year, revenue rose 6% to $5.6 billion. Looking forward, Paychex anticipates significant revenue growth of 16.5-18.5% for fiscal 2026, with the Management Solutions segment expected to grow by 20-22%. Additionally, the company has raised its cost synergy expectations to approximately $90 million for fiscal year 2026, following the completion of the Paycor (NASDAQ:PYCR) acquisition. This acquisition is expected to contribute significantly to Paychex’s growth, with revenue synergies projected to add 30-50 basis points to overall growth. Despite these positive developments, the broader market’s cautious sentiment has impacted Paychex’s stock performance.

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