Paychex Earnings: Another Solid Quarter; Paycor Acquisition Close to Completion

Wide-moat Paychex reported strong fiscal third-quarter results that were in line with our expectations. The company continued to benefit from robust client retention and margin expansion despite headwinds in Florida’s professional employer organization segment. Paychex’s $4.1 billion acquisition of Paycor is on track and expected to close next quarter. We have made slight adjustments accounting for updated guidance, while our longer-term revenue growth and operating margin expansion estimates are unchanged. As a result, we maintain our $130 fair value estimate and view the shares as slightly overvalued after the postearnings pop in the stock price.