Paychex, Inc. (PAYX) Q4 Earnings Preview: A Hug and a Small Drop?

Paychex, Inc. (NASDAQ:PAYX) will release financial results for the fiscal 2014 fourth quarter and full year ended May 31, 2014 via Business Wire after the financial markets close on Tuesday, July 1, 2014.

The Company will host a conference call at 10:30 a.m. ET on Wednesday, July 2, 2014 to review the results for the quarter. Participating in this call will be Martin Mucci, President and CEO, and Efrain Rivera, Senior Vice President, CFO, and Treasurer.

Wall Street anticipates that the Business Services provider will earn $0.40 per share for the quarter, which is $0.02 more than last year's profit of $0.38 per share. iStock expects PAYX to hit Wall Street's consensus number, the iEstimate is $0.40, too.

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Sales, like earnings, are expected to increase modestly, 5.5% year-over-year (YoY). Paychex's consensus revenue estimate for Q4 is $617.35 million; more than last year's $585.30 million.

With 12,000 full-time employees, Paychex provides payroll, human resource, insurance, and benefits outsourcing solutions for small to medium-sized businesses in the United States and Germany.

The payroll provider has a history of hugging Wall Street's consensus estimate as the iEsimate suggests. Earnings matched the street's view four of the last 16 quarters; topped the consensus by a penny eight of the last 16; better by $0.02 thrice; and maxing out at $0.03 once. The June announcement includes two of the on-target results and two $0.01 bullish surprises.

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Much like earnings, Paychex's EPS-driven, price sensitivity tends to be sticky as the average gain for the eight green reactions in the days surrounding the last 16 quarters averaged 1.71%. Meanwhile, the typical selloff off for the other eight was -3.55%.

With PAYX history of hugging the consensus, margins are going to be the difference between hitting or beating or missing by a penny or two. In this regard, the business services provider's management has done a good job managing expenses.

Total expenses have become a smaller part of the income statement relative to sales, which increases profitability. Squeezing out an additional 20-30 basis points of savings puts another penny or two on the bottom line, keeping the streak on hitting or beating Wall Street's consensus alive.

Overall: The iEstimate and Paychex, Inc. (NASDAQ:PAYX) suggest earnings will meet or slightly beat the consensus estimate. Considering shares backed off three of the last four June announcements, another small red response wouldn't be surprising.