Paychex Earnings: Slowing Employment Growth Offset by Recovering Demand for Higher-Value PEO

We maintain our $120 fair value estimate for wide-moat Paychex following second-quarter results that track our full-year top-line and profitability expectations. As we anticipated, Paychex reported moderating employment growth and wage inflation among small business customers, and weak seasonal hiring amid higher costs and constrained access to capital, and macroeconomic uncertainty. Shares fell a sharp 7% after the results release, and now trade in line with our unchanged valuation.