Paycom (PAYC) to Report Q2 Earnings: What’s in the Cards?

Paycom PAYC is set to report second-quarter 2018 results on Jul 31.

The company beat the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average positive surprise of 28.57%.

In the last reported quarter, the company reported non-GAAP earnings of 95 cents per share, which beat the Zacks Consensus Estimate of 90 cents and increased from the adjusted figure of 61 cents in the year-ago quarter.

Moreover, revenues of $153.9 million increased 29% from the year-ago quarter and surpassed the Zacks Consensus Estimate of $151 million.

For second-quarter 2018, Paycom Software expects revenues in the range of $123-$125 million. The Zacks Consensus Estimate is pegged at $124.47 million, indicating a 26.7% increase from the year-ago quarter.

The Zacks Consensus Estimate for earnings stands at 49 cents per share, indicating an increase of 88.5% on a year-over-year basis.

Let’s see how things are shaping up for the upcoming announcement.

Factors at Play

Paycom Software continues to gain from higher recurring revenues and traction in cloud-based offerings. Increasing demand for advanced human capital management (HCM) and payroll software solutions is a tailwind for the company.

Paycom’s single database HCM solution is gaining clients on a regular basis. The company continues to benefit from rising awareness among organizations regarding the benefits of new age human resource technologies.

The company is gaining from its regular investments in SaaS technology. Over the last few years, clients migrating from traditional payroll service providers to the company’s SaaS-based services have contributed significantly to its revenues.

The Zacks Consensus Estimate for recurring revenues is pegged at $124 million, which reflects a year-over-year jump of 29.2%.

However, increasing competition from companies like Paylocity PCTY, Intuit and Paychex remains a headwind, which could lead to pricing pressure and affect Paycom’s margins.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or #5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Paycom currently carries a Zacks Rank #3 but has an Earnings ESP of -7.79%.

Stocks to Consider

Here are some stocks that you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Castlight Health, Inc. CSLT with an Earnings ESP of +1.56%, and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

CyberArk Software Ltd. CYBR with an Earnings ESP of +3.38% and a Zacks Rank #3.

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