Paychex Earnings: Its The Economy

Paychex PAYX founder Tom Golisano returned in the wake of recent CEO departure to find significant deterioration in sales force productivity and closing ratios within core payroll product, which likely exacerbated the negative impact of downturn in hiring/rates over past couple yrs. Paychex thinks Intuit has been the beneficiary, based on Intuit's admission that a significant number of its recent growth was coming from the processors given a much more attractive price point. For now, PAYX has committed to several near term fixes to its sales organization, such as modifying core payroll product/pricing, rebalancing sales force, incentive plans, training, and enhancing territory/quota assignments. As long as core growth rates remain below trend, the mkt may be concerned that internal deficiencies could run deeper than the sales engine, such as whether PAYX has optimal product mix to compete effectively in today's marketplace. Deutsche Bank has a Hold rating on Paychecx with a price target of $26