Paychex Revenues Up 14%, Earnings Above Estimates

Paychex, a payroll processing company that focuses on smaller and mid-sized companies, said on Wednesday that quarterly earnings rose, as an increasing client base helped the company beat analyst expectations.

Paychex shares rose more than 3% in after hours trading.

The company said profit in its fiscal second quarter ended Nov. 30 rose to $132.7 million, or 35 cents a share, from $112.6 million, or 30 cents a share a year earlier.

Analysts had on average expected the company to earn 34 cents a share, according to Reuters Estimates.

"Paychex is consistent," said Andy Miedler, analyst at Edward Jones in St. Louis, adding that the company tends to generate solid earnings growth every quarter.

Miedler rates the company's shares a "hold," though, because at about 28 times fiscal 2007 earnings, they seem fully valued.

Automatic Data Processing a payroll processing company that tends to focus on larger companies than Paychex, trades at about 22 times forward earnings, so Paychex is already at a premium, Miedler said.

Revenue during the quarter rose to $454.9 million from $399.8 million a year earlier.

The Rochester, New York-based company's shares have risen about 4.7% this year through Wednesday's close, compared with an increase of more than 10% for the Dow Jones U.S. Financial Administration index.

Paychex shares fell 94 cents to close at $39.92 on Wednesday on Nasdaq, but regained most of those losses after the company released earnings after the close, and hovered near $41.00 in after hours trading.