Paychex price target maintained at $165 by RBC on mixed outlook

Investing.com - RBC Capital maintained its Sector Perform rating and $165.00 price target on Paychex (NASDAQ:PAYX) stock Wednesday, citing mixed growth trends and improved cost synergies from the Paycor (NASDAQ:PYCR) integration. According to InvestingPro data, the stock has declined 8.24% over the past week, with technical indicators suggesting oversold conditions.

The firm noted that Management Solutions’ organic growth slowed to 3%, affected by declining checks per client, challenging pricing comparisons, and salesforce distractions related to the Paycor integration process.

RBC also highlighted that Professional Employer Organization (PEO) growth decelerated to 4%, impacted by Multiple Employer Plan (MPP) enrollment headwinds, with further growth moderation expected in the first quarter of fiscal 2026.

Despite these challenges, Paychex raised its Paycor cost synergy target to $90 million from the previous $80+ million, supporting its fiscal 2026 operating margin guidance of 43%.

The improved synergies helped Paychex issue earnings per share growth guidance of 8.5-10.5% for fiscal 2026, exceeding market expectations despite ongoing macroeconomic uncertainty that RBC plans to monitor closely.

In other recent news, Paychex Inc . reported solid financial results for the fourth quarter of fiscal year 2025, with both earnings and revenue meeting analysts’ expectations. The company posted an adjusted diluted earnings per share (EPS) of $1.19, aligning with forecasts, and revenue reached $1.43 billion. Despite these steady results, Paychex’s stock experienced a decline, reflecting investor concerns amid broader market uncertainties. Looking ahead, Paychex anticipates significant revenue growth for fiscal 2026, projecting an increase of 16.5-18.5%.

Additionally, the company has completed key integration activities following the Paycor acquisition, which is expected to contribute significantly to the projected revenue growth. Analyst firms have expressed mixed sentiments; Morgan Stanley (NYSE:MS) lowered its price target for Paychex to $148.00, citing concerns about increased debt, while Stifel adjusted its target to $152.00 due to revenue guidance falling short of expectations. Both firms maintained neutral ratings. These developments highlight the company’s strategic initiatives and the cautious optimism of analysts regarding Paychex’s future performance.

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